Mandatory fiscal penalty for delayed duty payment cannot be reduced unless the statute expressly allows lesser relief.

Rule 96ZP(3) of the Central Excise Rules, 1944 was treated as prescribing a mandatory penalty for failure to pay monthly duty by the due date: the defaulting manufacturer became liable to pay the outstanding duty with interest and a penalty equal to the duty outstanding or Rs. 5,000, whichever was greater. The Commissioner (Appeals) could not reduce that penalty to a nominal amount because the provision was not discretionary and did not permit lesser substitution. The reduction was therefore inconsistent with the statutory mandate, and the original statutory penalty was restored.

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Issues: Whether, under Rule 96ZP(3) of the Central Excise Rules, 1944, the penalty for failure to pay the duty by the prescribed date could be reduced by the Commissioner (Appeals) to a nominal amount instead of being levied at the amount specified in the rule.

Analysis: The rule provided that where the manufacturer failed to pay the duty for the month by the prescribed date, he became liable to pay the outstanding duty with interest and a penalty equal to the amount of duty outstanding or Rs. 5,000, whichever was greater. The view that this penalty was only a maximum penalty was rejected in light of the later High Court ruling, which treated the proviso as prescribing the only applicable penalty. On that basis, the reduction of penalty by the Commissioner (Appeals) was inconsistent with the statutory mandate.

Conclusion: The penalty could not be reduced under Rule 96ZP(3), and the order reducing it was set aside. The restoration of the original order imposing the statutory penalty was upheld.

Ratio Decidendi: Where a fiscal penalty provision prescribes a specific penalty for default in payment of duty, the authority cannot treat that penalty as discretionary or reducible to a lesser amount unless the statute expressly permits such reduction.

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