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The upper bound on the capacity of a 3-node discrete memoryless relay channel is considered, where a source X wants to send information to destination Y with the help of a relay Z. Y and Z are independent given X, and the link from Z to Y is lossless with rate . A new inequality is introduced to upper-bound the capacity when the encoding rate is beyond the capacities of both individual links XY and XZ. It is based on generalization of the blowing-up lemma, linking conditional entropy to decoding error, and channel simulation, to the case with side information. The achieved upper-bound is strictly better than the well-known cut-set bound in several cases when the latter is , with being the channel capacity between X and Y. One particular case is when the channel is statistically degraded, i.e., either Y is a statistically degraded version of Z with respect to X, or Z is a statistically degraded version of Y with respect to X. Moreover in this case, the bound is shown to be explicitly computable. The binary erasure channel is analyzed in detail and evaluated numerically.