Koyo USA Corp., the company that started the bottled deep-sea water industry in Hawaii nearly a decade ago, was ordered to pay a $5 million penalty for violating state regulations governing the filtration of ocean water for human consumption, state Department of Health officials said Friday.

Koyo said it will appeal the fine, the largest the state has ever levied in a food safety case.

Health officials said an investigation begun on May 18 found that Koyo since July 2006 had failed to follow a process for filtering sea water as required under its permit with the state.

“Instead, the company purposefully diverted concentrated ocean water that had been rejected by its reverse osmosis system and, through bypass piping, blended it into their final bottled water product,” health officials said.

Koyo corrected the problem after receiving a ceaseand-desist order from the department on May 19, health officials said.

The state said the filtering violation did not lead to any health risk.

“Tests results from independent laboratories and the state laboratory have confirmed that consumption of the affected bottled water product does not pose an immediate and, or, substantial risk to human health,” said the department.

Koyo plant manager Larry Visocky called the $5 million penalty “highly punitive given the circumstances.”

“Koyo disagrees with this finding and fully plans to appeal it. We would like to politely point out that there was no product recall and there was never any danger to the public,” Visocky said.

Koyo’s bottled water is sold in Hawaii and Japan under the Mahalo brand.

The Koyo plant, along with facilities operated by several other deep-sea water bottlers, is located in the National Energy Laboratory of Hawaii at Keahole Point on Hawaii island. Koyo, founded by a Japanese businessman in 2002, was the first of the group to set up shop at the Kona ocean science and technology park.

Koyo pumps up sea water from a depth of 3,000 feet and first runs it through an “ultra-fine” filtration system, Visocky said. The water is then processed by a reverse osmosis system to remove the salt. Both of those steps are consistent with the state permit, he said.

Where health officials found fault with Koyo was for taking some of the water after the filtration process and combining it with the water that had been through the reverse osmosis process before bottling it, Visocky said. Koyo added small amounts of the ultra-fine filtered water back into the product to increase the mineral and salt content, Visocky said.

The fine was set at $5 million because of a number of factors, including the length of time the violations had been occurring, said Gary Gill, the department’s deputy director for environmental health.

“‘Made in Hawaii’ means the highest quality,” Gill said.

“People expect Hawaii products to be completely safe and manufactured to the highest standards. Any company that cuts corners and violates this trust harms the reputation of our islands and the good name of every product made in Hawaii,” he said.

The state chose not to impose the maximum penalty, which could have been as high as $20 million, Gill said. Koyo was fined about $6,000 for each day it was determined to be in violation of its permit requirements. The total penalty was based on the Koyo plant being in operation three days a week, he said.

“The permits are there for a reason,” Gill said. “This is the first time in Hawaii, and quite possibly in the U.S., that a government agency had approved filtered ocean water as an approved drinking water source. The permits were granted on the basis that the technology in place — reverse osmosis — is proven and tested, and that we could approve the product as safe for human consumption.”

Koyo has helped Hawaii became a global leader in deep-sea water exports because of strong demand from Japan.

Data compiled by the Foreign Trade Zone No. 9 in Honolulu showed that the value of Hawaii’s bottled water exports jumped from $1.6 million in 2003 to a peak of $41.2 million in 2007. Exports slipped to $35 million in 2008 and $29.4 million in 2009, with industry executives attributing the declines to a combination of the global recession and a maturing market in Japan.

Visocky said the Japanese market began to pick up again in March after the earthquake and tsunami boosted demand there for bottled water.

He said Koyo’s sales have risen by 15 percent to 20 percent since the natural disasters.