Capacity-based duty default attracts penalty; final abatement orders must be applied when duty and penalty are recomputed.

Penalty under Rule 96ZQ(5)(ii) was sustained where duty had already been determined under the capacity-based scheme and was not paid within the prescribed time; the Tribunal held that provisionality arguments and financial hardship did not displace the statutory consequence. In the separate appeal, a final abatement order had to be given effect in computing liability, so the duty and consequential penalty were reduced and the matter was remanded to the Assistant Commissioner for fresh quantification and communication of the revised figures. The document states that the challenge failed on the penalty issue in one appeal and succeeded only to the extent of recomputation in the other.

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Issues: (i) Whether penalty under Rule 96ZQ(5)(ii) was sustainable where duty had been determined under the annual capacity rules and remained unpaid within the prescribed time; (ii) whether the duty and consequential penalty in one appeal required reduction on account of an unchallenged abatement order and the matter had to be remanded for recalculation.

Issue (i): Whether penalty under Rule 96ZQ(5)(ii) was sustainable where duty had been determined under the annual capacity rules and remained unpaid within the prescribed time.

Analysis: The liability to pay duty had already been determined under the relevant annual capacity determination rules. The Tribunal distinguished the reliance placed on provisional determination cases and held that, on the facts, the duty was required to be paid by the prescribed date. Once the duty was not paid within time, the penalty provision came into operation. Financial hardship was not accepted as a sufficient explanation for non-payment.

Conclusion: The penalty was upheld and the assessee's challenge failed on this issue.

Issue (ii): Whether the duty and consequential penalty in one appeal required reduction on account of an unchallenged abatement order and the matter had to be remanded for recalculation.

Analysis: A prior order granting abatement for a specified period had attained finality and, subject to that finality, the duty and penalty were reduced correspondingly. The Tribunal directed that the recalculated figures be worked out by the Assistant Commissioner and communicated to the assessee.

Conclusion: The duty and penalty were reduced accordingly and the matter was remanded for fresh quantification.

Final Conclusion: The challenge to penalty failed in one appeal, while the other matter succeeded to the limited extent of reduction of duty and penalty and was sent back for recomputation.

Ratio Decidendi: Where duty has been determined under the applicable capacity-based scheme and is not paid within the prescribed time, the penalty provision applies notwithstanding a plea of provisionality or financial hardship; any final abatement order must be given effect in recomputing the duty and penalty.

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