Penalty under Compounded Levy Scheme may be reduced where duty and interest are paid and original penalty is excessive.

Delayed payment of duty under the Compounded Levy Scheme attracted penalty under Rule 96ZP(3) because the default was admitted, but the Tribunal treated the quantum as requiring proportionality. As the duty and interest had already been paid and the original penalty was found to be excessive, the Tribunal applied its earlier view that penalty should be commensurate with any gain made by the assessee. On that basis, the reduced penalty of Rs. 75,000 was upheld as reasonable and no further interference was called for.

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Issues: Whether, in a case of delayed payment of duty under the Compounded Levy Scheme, the penalty imposed under Rule 96ZP(3) of the Central Excise Rules, 1944 could be reduced where the duty and interest had been paid and the original penalty was found to be excessive.

Analysis: The delay in payment of duty under the Compounded Levy Scheme was admitted, so penalty was attracted. However, the entire duty along with interest had already been paid, and the penalty imposed by the Original Authority was considered exorbitant. The Tribunal followed its earlier view that in such cases penalty should be commensurate with the gain, if any, made by the party, and found the reduced penalty to be reasonable.

Conclusion: The reduction of penalty to Rs. 75,000/- was upheld and no interference was called for.

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