Rule 96ZQ(3) penalty is discretionary, and reduced penalty may be upheld on case-specific facts.

Penalty under Rule 96ZQ(3) of the Central Excise Rules, 1944 was treated as a ceiling rather than an inflexible mandatory levy. The adjudicating authority was held to retain discretion to impose a lesser penalty having regard to the facts and circumstances of the case, and the reduction made in appeal was upheld. The conflicting views of High Courts did not displace the binding approach of the Supreme Court relied upon on the point, so full penalty was not required in every case.

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Issues: Whether the penalty under Rule 96ZQ(3) of the Central Excise Rules, 1944 was mandatory at the full amount equal to the duty not paid on the due date, or whether the adjudicating authority could reduce it having regard to the facts and circumstances of the case.

Analysis: The provision was treated as prescribing only the maximum penalty, not an inflexible minimum. In view of the Supreme Court authority relied upon, and following the view that the assessing authority retains discretion to impose a lesser penalty depending on the circumstances, the reduction made by the appellate authority was held to be justified. The existence of conflicting High Court views did not displace the binding effect of the Supreme Court's approach on the point.

Conclusion: The penalty under Rule 96ZQ(3) was not required to be imposed invariably at the full amount, and the reduction of penalty was upheld.

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