Maximum excise penalty can be reduced where the statute permits discretion and facts justify a lesser amount.

Section 11AC of the Central Excise Act, 1944 and Rule 173Q were read as prescribing a maximum penalty, not a compulsory fixed penalty. On that construction, the adjudicating authority and the Tribunal retain discretion to impose a lesser penalty where the statutory language permits and the facts justify it. The Tribunal's reduction of penalty was therefore treated as a proper exercise of discretion, and the Revenue's challenge failed. The governing principle is that a penal provision framed in ceiling terms does not oust discretion to impose a lower penalty on the circumstances of the case.

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Issues: Whether the penalty prescribed under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules is mandatory or whether the adjudicating authority or Tribunal retains discretion to impose a lesser penalty on the facts and circumstances of the case.

Analysis: The provision considered by the Court was read in the light of the Supreme Court's construction of a similar penal clause, namely that where the statute prescribes a penalty in maximum terms, the authority is not denuded of discretion to impose a lesser amount if the statutory language so permits. Applying that principle, the Court held that although the levy of penalty is authorised by the relevant excise provisions, the amount remains subject to judicially exercised discretion and must be determined with reference to the facts and circumstances. The reduction made by the Tribunal was therefore treated as a proper exercise of discretion.

Conclusion: The penalty under the excise provisions was not compulsory in the maximum amount, and the Tribunal was competent to reduce it. The Revenue's challenge failed.

Ratio Decidendi: Where the statutory language prescribes a penalty as the ceiling or maximum, the authority may impose a lesser penalty by exercising discretion judiciously on the facts of the case.

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