Reduced penalty under Section 11AC runs from the appellate order when duty determination is still under appeal.

Section 11AC of the Central Excise Act provides for penalty equal to duty where the default is attended by the requisite mens rea, but its first proviso allows reduced penalty of 25% if duty and interest are paid within thirty days of communication of the order determining duty. Where the adjudication order is carried in appeal, the duty determination does not attain finality until appellate proceedings conclude, so the statutory thirty-day period is computed from the appellate order. On that reasoning, the appellate authority can extend the reduced-penalty option under the proviso.

---

---

Issues: Whether the Commissioner (Appeals) could grant the assessee the statutory option under the first proviso to Section 11AC of the Central Excise Act, 1944 to pay penalty at 25% of the duty, and whether the thirty-day period for such payment runs from the adjudication order or from the appellate order.

Analysis: Section 11AC operates in two parts. The main provision prescribes penalty equal to the duty determined where non-levy, short-levy or similar default occurs with the requisite mens rea. The first proviso grants a reduced penalty of 25% if duty and interest are paid within thirty days of communication of the order determining such duty. The appellate process was treated as a continuation of the original proceedings, so the adjudication order does not attain finality until the appeal is concluded. On that basis, the duty determined under Section 11A(2) becomes final only when sustained in appeal, and the statutory option attached to the penalty provision can be worked out from the appellate order. The distinction drawn by the Tribunal on the facts was rejected as misdirected.

Conclusion: The Commissioner (Appeals) was competent to grant the reduced-penalty option, and the thirty-day period under the first proviso to Section 11AC runs from the appellate order. The issue was decided in favour of the assessee.

Final Conclusion: The Tribunal's order was set aside and the assessee's appeal was allowed, with the penalty relief under Section 11AC sustained.

Ratio Decidendi: Where an adjudication order is carried in appeal, the determination of duty attains finality only upon conclusion of the appellate proceedings, and the statutory reduced-penalty benefit linked to payment within thirty days is to be computed from the appellate order.

---