Discretionary penalty under Central Excise rules may be reduced where delay in duty payment lacks intent to evade.

Penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was held to be discretionary and capable of reduction below the maximum prescribed amount where the facts justified it. The assessee, operating under the compounded levy scheme under Section 3A of the Central Excise Act, 1944, had delayed duty payment after receiving abatement orders under Rule 96ZO(2). CESTAT found that the assessee had awaited the outcome of the abatement claims and that there was no material showing intent to evade duty, although there was unexplained delay after the second abatement order. A reduced penalty was therefore considered sufficient.

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Issues: Whether penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 could be reduced below the maximum prescribed amount having regard to the facts and circumstances of the case.

Analysis: The assessee was operating under the compounded levy scheme under Section 3A of the Central Excise Act, 1944 and had delayed payment of duty after receipt of abatement orders under Rule 96ZO(2) of the Central Excise Rules, 1944. The Tribunal noted that the penalty provision was discretionary and that a lesser penalty could be imposed depending on the surrounding facts. On the facts, the assessee had awaited the outcome of the abatement claims and there was no material to attribute an intent to evade duty, though there was an unexplained delay after the second abatement order.

Conclusion: The penalty under Rule 96ZO(3) was lawfully reducible, and a reduced penalty of Rs. 25,000 was held sufficient.

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