What is the criteria for choosing the Time Limits on a program?

I was trying to solve the CAO Stage 2 problem in the September Challenge. However, it shows that my solution timed out. The time limit for the problem is 1 secs and I got TLE. However, some submitted their solutions in C++ 4.3.2 only and their solution was accepted despite the fact that they took anywhere in between 0.00 to 6.45 secs. So, how is the Time limit decided?

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