Monthly excise duty short-payment attracts penalty where the existing capacity-based order remains operative despite a pending re-determination request.

Rule 96ZP(3) of the Central Excise Rules, 1944 made penalty and interest payable where a manufacturer failed to discharge the full monthly duty liability. Non-payment of the entire duty for May 1998 attracted the provision because the duty continued to be determined by the order fixing annual capacity of production then in force. A pending request for re-determination of capacity did not suspend or invalidate that operative order, and liability persisted until the order was revised or set aside. The assessee could not withhold payment on the basis of a sought reassessment, and penalty remained leviable, though reduced to a nominal amount.

---

---

Issues: Whether penalty was leviable under Rule 96ZP(3) of the Central Excise Rules, 1944 for short-payment of duty during the month in question, and whether a pending request for re-determination of annual capacity of production rendered the existing order fixing duty liability inoperative.

Analysis: Rule 96ZP(3) provided for payment of the outstanding duty with interest and penalty where the manufacturer failed to pay the whole of the duty payable for any month. The respondent had not paid the full duty for May 1998 and had deposited only a part amount against the liability worked out on the basis of the order then in force determining annual capacity of production. A request for re-determination of annual capacity, or a later revision of capacity, did not suspend the operation of the existing order. The duty liability continued to subsist until the earlier order was revised or set aside, and the assessee could not decline payment on the footing that reassessment had been sought.

Conclusion: Penalty was leviable and the respondent remained liable for penalty under Rule 96ZP(3), though the quantum was reduced to a nominal amount of Rs. 20,000/- instead of the maximum penalty.

---