Penalty under Section 11AC is a ceiling, not a fixed amount, and lesser penalty may be imposed on the facts.

Section 11AC of the Central Excise Act, read with Rule 173Q of the Central Excise Rules, was treated as prescribing a maximum penalty rather than an inflexible fixed penalty in every case. The assessing authority and Tribunal retain discretion to impose a lesser penalty according to the facts, the nature of the contravention, and the surrounding circumstances. The reference to statutory reduction to 25% on timely payment was noted as supporting this construction. The Tribunal was therefore entitled to interfere where the facts justified reduction, and the reduced penalty was upheld.

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Issues: Whether the Tribunal has discretion to reduce the penalty leviable under Section 11AC of the Central Excise Act, 1944.

Analysis: The Court held that Section 11AC, when read with Rule 173Q of the Central Excise Rules, 1944, does not create an inexorable fixed penalty in every case. The scheme of the provisions shows that the penalty prescribed under Section 11AC operates as the maximum limit, while the assessing authority retains discretion to impose a lesser penalty depending on the facts, the nature of the contravention, and the surrounding circumstances. The Court also noticed that the statutory amendment providing reduction to 25% on timely payment supports the view that the provision is not confined to an inflexible full penalty in every case. The Tribunal was therefore entitled to interfere where the facts justified reduction.

Conclusion: The Tribunal does have discretion to reduce the penalty under Section 11AC, and the reduction made in these cases was upheld.

Ratio Decidendi: Where penalty under Section 11AC is attracted along with Rule 173Q, the amount stated in Section 11AC is the ceiling, not an invariable fixed penalty, and a lesser penalty may be imposed on a proper consideration of the case.

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