Disproportionate penalty for brief duty-payment delay under the compounded levy scheme was held unsustainable and vacated.

Penalty for a brief delay in payment of duty under the compounded levy scheme was found unsustainable where the duty liability had already been discharged before the order determining liability. The levy of a penalty equal to the full duty amount, together with interest, was considered grossly unreasonable and disproportionate on the facts, especially because no justification was recorded for imposing such a severe penalty. The penalty was therefore vacated.

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Issues: Whether the penalty imposed for a short delay in payment of duty under the compounded levy scheme was sustainable.

Analysis: The duty liability had been discharged before the Commissioner's order determining the liability, and the delay in payment was only for a brief period. In these circumstances, imposition of a penalty equal to the full amount of duty, along with interest, was held to be grossly unreasonable and disproportionate, and no justification was recorded for such a severe levy.

Conclusion: The penalty was unsustainable and was vacated.

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