Penalty under Rule 96ZQ(5)(ii) remanded pending vires challenge, with merits to be decided after High Court ruling.

Penalty proceedings under Rule 96ZQ(5)(ii) were remanded for fresh consideration because the validity of the rule was still under challenge before the High Courts. The matter had earlier been sent back in light of Dharamendra Textile Processors, but the later Supreme Court decision in Krishna Processors revived the vires challenge, making final determination on penalty inappropriate at that stage. The Original Adjudicating Authority was directed to decide the issue again after the High Court's ruling on validity, and the assessee remained free to contest the case on merits.

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Issues: Whether the matter relating to penalty under Rule 96ZQ(5)(ii) should be remanded for fresh consideration pending the outcome of the challenge to the vires of the rule.

Analysis: The matter had been sent back for reconsideration of the penalty in the light of the law declared in Dharamendra Textile Processors. The later Supreme Court decision in Krishna Processors indicated that the challenge to the vires of Rule 96ZQ(5)(ii) stood revived and that the question of validity was pending before the High Courts. In that situation, the question of penalty under the rule could not be finally determined on merits at that stage.

Conclusion: The matter was remanded to the Original Adjudicating Authority for fresh decision after the High Court's declaration on the vires of Rule 96ZQ(5)(ii), and the assessee was left free to contest the case on merits.

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