Reasoned penalty reduction required: unreasoned discretionary cut in statutory penalty was set aside and remitted for reconsideration.

A statutory penalty reduction must be supported by reasons showing application of mind to all relevant factors; a materially reasonless exercise of discretion cannot be sustained. Here, the Tribunal reduced the penalty from a much higher amount to a nominal sum based only on abatement of related appeals, without stating any statutory basis or considering the parameters governing quantum. The High Court held that such an unreasoned order could not stand on the issue of penalty fixation and set it aside, remitting the matter to the Tribunal for fresh determination of the quantum of penalty.

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Issues: Whether the Tribunal's order reducing the penalty from Rs. 10 crores to Rs. 1 lakh could be sustained despite lacking detailed reasons and whether the matter had to be remitted for reconsideration of the quantum of penalty.

Analysis: The reduction of penalty was based only on the fact that appeals against the company and one director had abated, but no statutory basis or full consideration of the relevant parameters governing the quantum of penalty was reflected. Since the Tribunal was exercising discretion in a matter affecting a substantial penalty, it was required to record reasons showing application of mind to all relevant factors. In the absence of such reasoning, the order could not stand on the question of fixation of penalty.

Conclusion: The Tribunal's order reducing the penalty was unsustainable and was set aside, with the matter remitted to the Tribunal for fresh determination of the quantum of penalty.

Ratio Decidendi: Where a statutory penalty is reduced in exercise of discretion, the decision must be supported by reasons showing consideration of all relevant factors; a materially reasonless reduction is liable to be set aside and remitted for reconsideration.

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