Penalty under Rule 96ZP(3) fails when duty is paid late with interest and no amount remains outstanding at month-end.

Penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 was held unsustainable where the duty was paid on the 12th day of the month together with interest, because the proviso differentiates between interest for delayed payment and penalty for duty outstanding at the end of the month. As the duty liability had been discharged before month-end, no duty remained outstanding for penalty purposes. The inference of deliberate evasion was rejected as unsupported by the rule and the facts on record, and the penalty order was set aside with consequential relief.

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Issues: Whether penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 was sustainable where the duty was paid on the 12th day of the month with interest, and whether such delayed payment justified an inference of deliberate evasion.

Analysis: The proviso to Rule 96ZP(3) distinguishes between interest and penalty. Interest is payable on the outstanding duty from the 11th day until actual payment, but penalty is attracted only on the amount of duty outstanding at the end of the month. Since the duty liability was discharged on 12th March 1999 with interest, there was no outstanding duty at the end of the month. The finding that the delay was deliberate and intended to evade duty was therefore unsupported by the language of the rule and the facts on record.

Conclusion: The penalty was not sustainable and the finding of deliberate evasion was rejected.

Final Conclusion: The penalty order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Penalty under Rule 96ZP(3) can be imposed only on duty outstanding at the end of the month, and not merely because payment was made after the due date with interest.

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