Penalty under Section 11AC may be reduced where circumstances justify a lesser amount and duty was paid before notice.

Penalty under Section 11AC of the Central Excise Act is not invariably required to match the duty amount; the Tribunal noted that the provision sets an upper limit and leaves discretion to impose a lesser penalty in appropriate cases. Where the duty had been paid before the show cause notice and the adjudicating authority considered the surrounding circumstances, a reduced penalty could be sustained. The cited authorities were read as not creating any rule mandating parity between duty and penalty in every case.

---

---

Issues: Whether penalty under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules must invariably be equal to the duty amount, or whether the adjudicating authority may impose a lesser penalty having regard to the facts and circumstances of the case.

Analysis: The duty had been paid before issuance of the show cause notice. The Tribunal relied on the earlier view that Section 11AC prescribes the upper limit of penalty and does not compel imposition of the maximum in every case. It also noted that the cited authorities did not lay down any contrary rule requiring penalty to be equal to the duty in all cases. On the facts, the Commissioner (Appeals) had considered the deposit of duty and other circumstances while imposing a reduced penalty.

Conclusion: The lesser penalty was valid and no interference was warranted. The issue is decided in favour of the assessee and against the Revenue.

Final Conclusion: The Revenue's challenge to the reduced penalty failed, and the appellate order sustaining the lesser penalty was affirmed.

Ratio Decidendi: Penalty under Section 11AC of the Central Excise Act is not mandatory at the maximum prescribed level in every case, and the authority retains discretion to impose a lesser penalty based on the circumstances.

---