Proportionate penalty under compounded levy rules applies where duty is paid after only a minimal delay without intent to evade.

Where duty payment under the compounded levy scheme is delayed by only one day and the duty is paid the next day, penalty under Rule 96ZQ(5)(ii) need not be imposed at an amount equal to the outstanding duty if there is no indication of intent to evade. The penalty should be proportionate to the circumstances and commensurate with any gain, if any, made by the assessee. On that basis, the minimum prescribed penalty of Rs. 5,000 was treated as appropriate.

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Issues: Whether, for a one-day delay in payment of duty under the compounded levy scheme, penalty under Rule 96ZQ(5)(ii) was required to be sustained at the amount equal to the duty outstanding, or whether it could be reduced to the minimum prescribed penalty.

Analysis: The delay in each case was only of one day and the duty was paid on the very next day. In such circumstances, no intention to evade the duty liability was found. Following the Gujarat High Court decision relied upon, penalty equal to the outstanding duty was held to be unwarranted and the penalty was to be commensurate with the gain, if any, made by the party. Keeping in view the minimum penalty prescribed under Rule 96ZQ(5)(ii), the penalty was reduced to Rs. 5,000 in each case.

Conclusion: The penalty was reduced to the minimum prescribed amount of Rs. 5,000 in each case, in favour of the assessee.

Ratio Decidendi: Where duty is paid with only a minimal delay and there is no indication of intent to evade, penalty under Rule 96ZQ(5)(ii) should be proportionate and not automatically equal to the duty outstanding.

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