Compounded levy default and no abatement claim keep mandatory penalty exposure alive despite belated duty payment

Under the compounded levy scheme, duty liability continued during the relevant period unless the assessee obtained abatement for factory closure. Where no abatement was claimed and no valid protest was made, belated payment of duty did not remove exposure to the mandatory penalty under Rule 96ZP(3) of the Central Excise Rules, 1944. The appellate authority's reduced penalties were treated as a fair exercise of discretion, and no further waiver or reduction was justified on the facts stated.

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Issues: Whether the assessee, having defaulted in monthly duty payment under the compounded levy scheme and having made belated payment without seeking abatement for closure of the factory, was liable to penalty under Rule 96ZP(3) of the Central Excise Rules, 1944.

Analysis: The assessee did not claim abatement of duty for any period of closure, and therefore the plea that duty was not payable on account of closure could not be accepted. The statutory liability under Section 3A of the Central Excise Act remained applicable during the material period. In the absence of any protest or valid abatement claim, the delayed payment of duty did not wipe out the penalty exposure. Rule 96ZP(3) operated as a mandatory penalty provision against a defaulter, and the lower appellate authority had already reduced the penalties substantially in a fair exercise of discretion.

Conclusion: The assessee remained liable to penalty, and no further reduction or waiver was warranted.

Final Conclusion: The penalties sustained by the appellate authority were upheld and the appeals failed.

Ratio Decidendi: Where duty is payable under the compounded levy scheme and no abatement is sought for closure, belated discharge of duty does not extinguish the mandatory penalty prescribed for default.

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