Restricted penalty under Central Excise law applies where prior deposits exceed crystallised duty liability before quantification.

Where an assessee had already deposited an amount exceeding the crystallised duty liability before communication of the quantified demand, the benefit of restricted penalty under Section 11AC of the Central Excise Act, 1944 was treated as available. The earlier deposit was undisputed, and the excess lying with the revenue was to be adjusted after working out the full liability, including duty, interest, penalty and directors' penalties. The operative effect was that penalty was limited to 25% of the duty confirmed, with consequential refund or adjustment of the surplus amount.

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Issues: Whether the appellant was entitled to the benefit of payment of only 25% of the duty confirmed as penalty under Section 11AC of the Central Excise Act, 1944, in view of the amounts already deposited before communication of the crystallized duty liability.

Analysis: The record showed that the appellant had deposited an aggregate amount exceeding the crystallized duty liability before being informed of the exact quantified demand. The earlier deposit was not disputed. On these facts, the benefit of restricted penalty under Section 11AC was held to be available, and the excess amount lying with the revenue was directed to be adjusted and refunded after working out the total liability, including duty, interest, penalty and the directors' penalties.

Conclusion: The appellant was held entitled to the benefit of penalty limited to 25% of the duty confirmed, with consequential refund or adjustment of the excess amount.

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