Penalty discretion under Central Excise Rules upheld where Tribunal gave reasons for reducing the quantum within prescribed limits.

Section 11AC of the Central Excise Act was treated as mandating penalty imposition, while Rule 25 of the Central Excise Rules was read as giving discretion only on the quantum of penalty within prescribed limits. The Tribunal's reduction of the penalty was supported by recorded reasons and was viewed as a reasonable and possible exercise of discretion on the facts. As no perversity or capriciousness in that exercise was shown, the reduction was upheld and no substantial question of law arose.

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Issues: Whether the Tribunal was justified in reducing the quantum of penalty imposed under Rule 25 of the Central Excise Rules, 2000 in the light of Section 11AC of the Central Excise Act, 1944.

Analysis: Section 11AC was treated as providing for levy of penalty without discretion as to imposition, whereas Rule 25 was held to confer discretion regarding the quantum of penalty within the limits prescribed by the Rules. The reduction made by the Tribunal was found to be based on reasons recorded in its order and to represent a reasonable and possible view on the facts. No perversity or capricious exercise of discretion was shown.

Conclusion: The Tribunal was justified in reducing the quantum of penalty, and no substantial question of law arose.

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