Proportional penalty for delayed excise duty payment reduced where short payment arose from clerical error and was later made good.

Delayed payment of a small differential excise duty under Rule 173GG(3) was considered in light of a clerical short-payment error, later made good with interest. The text states that although the rule prescribed interest and a statutory penalty for delay, the short-paid duty was ultimately paid and no pecuniary advantage remained from the delay. It further notes that the penalty should bear a reasonable relation to the unpaid amount and the cause of delay, because mechanical application in every case would be oppressive. On that basis, the penalty was reduced from Rs. 66,000 to Rs. 500.

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Issues: Whether the penalty imposed for delayed payment of a small differential duty under Rule 173GG(3) of the Central Excise Rules, 1944 was liable to be reduced.

Analysis: The liability provision prescribed interest and a penalty of Rs. 500 per day for delay, but the delay here arose from a clerical mistake in short payment of a very small amount. The short-paid duty had subsequently been paid with interest, thereby neutralizing any pecuniary advantage from the delay. The penalty, though statutory, had to bear some relation to the amount remaining unpaid and the reason for the delay, and its mechanical application in every case would make the provision oppressive in operation.

Conclusion: The penalty was rightly interfered with and reduced from Rs. 66,000 to Rs. 500.

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