Penalty discretion under Rule 26 upheld as a ceiling-only provision, rejecting any mandatory minimum of Rs. 10,000.

Rule 26 of the Central Excise Rules was construed as prescribing only a maximum penalty, capped at the duty involved or Rs. 10,000, whichever was greater, rather than a mandatory minimum. The adjudicating authority therefore retained discretion to impose any penalty up to that ceiling. The construction urged by the Revenue was rejected because the rule did not require a penalty of at least Rs. 10,000, and the respondent's penalty of Rs. 2,500 was sustained.

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Issues: Whether Rule 26 of the Central Excise Rules prescribed a minimum penalty of Rs. 10,000 or only an upper limit, and whether the penalty of Rs. 2,500 on the respondent could be sustained.

Analysis: The rule was read as fixing only the ceiling of penalty, namely an amount not exceeding the duty involved or Rs. 10,000, whichever is greater. On that construction, the adjudicating authority retained discretion to impose any penalty up to that maximum. The rule did not contain language requiring a penalty of at least Rs. 10,000. The Revenue's reading would have been supported only if the rule had used words such as "equal to" instead of "not exceeding".

Conclusion: The penalty under Rule 26 was held to be discretionary within the stated maximum and not subject to a mandatory minimum of Rs. 10,000. The respondent's penalty was upheld and the Revenue's appeal failed.

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