Reduced penalty under Section 11AC applies where duty and interest are paid within the proviso period, not equal duty penalty.

Section 11AC of the Central Excise Act, 1944 allows a reduced penalty of 25% of the duty determined where the duty and interest are paid within the statutory time prescribed by the provisos, and that concession is mandatory rather than discretionary. The text states that, on facts, the duty and interest had already been paid before the adjudication order, so the authorities could not insist on a penalty equal to the duty amount. It further notes that the provisos inserted in 2000 governed the issue and that the earlier Supreme Court ruling on the mandatory nature of Section 11AC did not override the express statutory concession.

---

---

Issues: Whether, in a case covered by Section 11AC of the Central Excise Act, 1944, the assessee was entitled to the reduced penalty of 25% of the duty determined where the duty and interest had been paid before the adjudication order and whether the Revenue could insist on penalty equal to the duty amount.

Analysis: Section 11AC provides for a penalty equal to the duty determined where non-payment or short-payment is attributable to fraud, suppression, or similar default. The first proviso, read with the second proviso, carves out a statutory concession where the duty determined under Section 11A(2) and the interest under Section 11AB are paid within thirty days from the date of communication of the adjudication order, in which event the penalty is limited to 25% of the duty so determined and that reduced penalty must also be paid within the stipulated period. The judgment held that the reduced penalty is not a matter of discretion but flows from the statutory provisos. The facts showed that the duty and interest had already been paid before the adjudication order, and the authorities below wrongly insisted on penalty equal to the duty amount. The court also held that the later provisos inserted in 2000 governed the case and that the earlier Supreme Court ruling on the mandatory nature of Section 11AC did not displace the express concession contained in those provisos.

Conclusion: The assessee was entitled to penalty limited to 25% of the duty determined, and the Revenue's challenge failed.

Final Conclusion: The statutory concession under Section 11AC applied on the facts, the penalty stood confined to 25% of the duty determined, and the Revenue appeal was rejected.

Ratio Decidendi: Where the duty and interest are paid within the statutory framework of the provisos to Section 11AC, the reduced penalty prescribed by those provisos must be applied and penalty equal to the duty cannot be insisted upon contrary to the statute.

---