Proportionate excise penalty: brief, explained delay justified reduction to the mandatory minimum under Rule 96ZP(3).

A brief, satisfactorily explained delay in payment of central excise duty was treated as insufficient to justify a penalty equal to duty under Rule 96ZP(3) of the Central Excise Rules, 1944. The delay was only two days, arose from bank holidays, and the duty was paid on the next working day; the explanation had been accepted and interest remained payable. In these circumstances, the excessive penalty was reduced to the mandatory minimum prescribed under the rule, showing that while the minimum penalty requirement was treated as binding, residual discretion on quantum had to be exercised reasonably and proportionately.

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Issues: Whether the penalty imposed under Rule 96ZP(3) of the Central Excise Rules, 1944 could be sustained at the maximum level despite a brief, satisfactorily explained delay in payment of duty, and whether the minimum penalty prescribed under the rule was to be applied.

Analysis: The delay in payment was only of two days and was attributable to bank holidays on the relevant dates. The explanation for the delayed payment had been accepted by the adjudicating authority, and the duty had been paid on the very next working day. The appellants also undertook to pay the interest confirmed in the order. In these circumstances, the penalty equal to duty was found to be excessive and disproportionate to the lapse. At the same time, the rule was treated as mandatory in its minimum penalty requirement, justifying imposition of the prescribed minimum amount.

Conclusion: The penalty equal to duty was set aside and replaced by the minimum penalty of Rs. 5,000/- under Rule 96ZP(3), while the liability to pay interest as confirmed was maintained.

Ratio Decidendi: Where a statutory penalty provision prescribes a mandatory minimum, the authority must exercise any residual discretion on penalty quantum reasonably and proportionately, and may reduce an excessive penalty to the minimum prescribed where the delay is brief and satisfactorily explained.

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