Penalty under Rule 96ZQ fails when payment liability depends on final determination of annual production capacity.

Rule 96ZQ penalty was treated as unsustainable where the duty-payment obligation was linked to prior determination of annual capacity of production and that determination had not been finally made. The Tribunal read the rule within the larger scheme governing capacity-based assessment and payment, and held that the penalty could not stand on the facts found. The dispute was confined to penalty, as the duty demand itself was not contested, and the appeal was allowed in favour of the assessee. The decision underscores that default-based penalty cannot be sustained unless the relevant payment liability on the due date is clearly established under the governing rule.

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Issues: Whether penalty imposed for failure to pay duty under Rule 96ZQ was sustainable when the annual capacity of production had not yet been finally determined.

Analysis: The dispute was confined to penalty, as the duty demand was not contested. The Tribunal read Rule 96ZQ in the context of the scheme for determination of annual capacity of production and payment of duty, and accepted that the obligation to make payment in the manner contemplated by the rule was linked to such determination. In view of the language of the rule and the earlier Tribunal decision relied upon, the Tribunal held that the penalty could not be sustained on the facts found.

Conclusion: The penalty was set aside and the appeal was allowed in favour of the assessee.

Final Conclusion: The order confirms that, on the facts of the case, penalty for non-payment was not exigible where the statutory framework tied the payment obligation to determination of annual capacity of production.

Ratio Decidendi: Where the statutory duty-payment mechanism is dependent on determination of annual capacity of production, penalty for default cannot be sustained unless the liability to pay on the relevant due date is clearly established under the governing rule.

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