Penalty ceiling under Central Excise rules is maximum only, leaving adjudicating discretion to impose a lesser amount.

Rule 25(1) of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944, prescribes only a maximum penalty because the phrase "not exceeding" limits the penalty to a statutory ceiling. The corresponding language in Rule 173Q(1) of the Central Excise Rules, 1944 was treated the same way, and the words "whichever is greater" do not remove the adjudicating authority's discretion to impose a lesser penalty on the facts. Penalty under these provisions remains a discretionary, quasi-criminal consequence that must reflect the circumstances of the case. The referred question was answered against the Revenue and in favour of the assessee.

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Issues: Whether the amount prescribed under Rule 25(1) of the Central Excise Rules, 2002 is the minimum penalty that must be imposed, or only the maximum limit of penalty.

Analysis: Rule 25(1), read with Section 11AC of the Central Excise Act, 1944, makes the penalty subject to the statutory ceiling and uses the expression "not exceeding," which indicates a maximum and not a mandatory minimum. The corresponding provision in Rule 173Q(1) of the Central Excise Rules, 1944 was understood in the same manner, and the words "whichever is greater" do not curtail the adjudicating authority's discretion to impose a lesser penalty on the facts of the case. A rule framed under the statute cannot be construed so as to conflict with the parent Act, and penalty being a discretionary, quasi-criminal consequence must depend on relevant circumstances.

Conclusion: The prescribed amount is the maximum penalty and not the minimum; the adjudicating authority retains discretion to impose a lesser penalty. The question referred was answered against the Revenue and in favour of the assessee.

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