Compounded levy penalty must stay within the statutory minimum where duty was paid before the due date.

Failure to pay duty by the prescribed date attracted liability to interest and penalty under the compounded levy scheme, but where the duty for both fortnights had already been discharged before the 5th of the succeeding month, no outstanding duty remained for the penalty to be computed on. The tribunal held that default still triggered penal liability, yet the penalty could not exceed the statutory minimum. The assessee was therefore liable only to the minimum penalty for each default, and the aggregate penalty was reduced accordingly.

---

---

Issues: Whether, under the applicable compounded levy penalty provision, the assessee was liable to a penalty where the duty for both fortnights had been discharged before the 5th of the succeeding month, and if so, what should be the quantum of penalty.

Analysis: The penalty provision in force during the relevant period provided that on failure to pay duty by the specified date, the assessee became liable to pay the outstanding duty with interest and to a penalty equal to the duty outstanding from him for a month payable by the 5th of the succeeding month or Rs. 5,000, whichever was greater. On the admitted facts, there was no outstanding duty remaining by the 5th of the succeeding month because the duty for both fortnights had been paid before that date. Therefore, while default in timely payment attracted penal liability, the amount of penalty could not exceed the statutory minimum.

Conclusion: The assessee was liable only to the minimum statutory penalty of Rs. 5,000 for each default, and the aggregate penalty was reduced to Rs. 15,000.

---