Penalty discretion under Central Excise law upheld; admitted duty liability cannot be reopened through cross-objection.

Penalty under Section 11AC of the Central Excise Act was treated as subject to a statutory ceiling, not as an inflexible mandate that the adjudicating authority must always impose the maximum equal to the duty evaded; on the facts, the Tribunal's reduced penalty was upheld. The assessee could not reopen differential duty liability through cross-objection after having accepted that liability and paid it during investigation, especially when it had not disputed the demand in adjudication. The result was that the Revenue obtained no relief against the reduced penalty, and the assessee's challenge to the duty liability also failed.

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Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 had to be imposed strictly at an amount equal to the duty evaded, or whether the adjudicating authority retained discretion in the quantum of penalty; (ii) whether the assessee could, by cross-objection, challenge the differential duty liability after having accepted and discharged it during investigation.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 had to be imposed strictly at an amount equal to the duty evaded, or whether the adjudicating authority retained discretion in the quantum of penalty.

Analysis: The penalty question was treated as settled by the cited precedent, which read the statutory scheme as prescribing the ceiling of penalty rather than removing all discretion. The provision was understood in the context of the facts to permit a judicious exercise of discretion in fixing the penalty, and the Tribunal's reduction of penalty was not shown to be legally infirm.

Conclusion: The Revenue's challenge to the reduced penalty failed, and the issue was decided against the Revenue.

Issue (ii): Whether the assessee could, by cross-objection, challenge the differential duty liability after having accepted and discharged it during investigation.

Analysis: The assessee had accepted liability for the differential duty and made payment during investigation, and did not contest the demand in the adjudication proceedings. On that footing, the duty liability could not be reopened through the cross-objection filed in answer to the Revenue's appeal.

Conclusion: The cross-objection was rejected and this issue was decided against the assessee.

Final Conclusion: The Tribunal upheld the penalty order as not warranting interference and declined to disturb the duty already accepted and paid, leaving the Revenue's appeal and the assessee's cross-objection without relief.

Ratio Decidendi: Where the statute prescribes penalty with a quantified ceiling, the adjudicating authority may exercise discretion in fixing the amount on the facts of the case, and a party that has accepted and discharged duty liability cannot later reopen that conceded liability in cross-objection.

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