Mandatory excise penalty and ultra vires rule doctrine limit appellate interference with penalties under the taxing statute.

Rule 96ZO(3) of the Central Excise Rules, 1944 was treated as prescribing a mandatory penalty, leaving no discretion to the adjudicating or appellate authority to reduce it on equitable grounds. The note also states that statutory appellate jurisdiction cannot sustain a penalty founded on a provision that has been declared ultra vires or non-existent, because a void rule cannot support a valid levy under the Act. On that footing, the tribunal's order was left undisturbed and the appeals failed.

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Issues: (i) Whether penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was mandatory and could be reduced by the appellate authority; (ii) whether, in an appeal under Section 35G of the Central Excise Act, 1944, the Court could sustain a penalty where the underlying rule had been declared ultra vires and non-existent.

Issue (i): Whether penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was mandatory and could be reduced by the appellate authority.

Analysis: The rule prescribed penalty equal to the outstanding duty or Rs. 5,000, whichever was greater. The decision proceeded on the basis that the Supreme Court had already held penalty under the relevant provisions to be mandatory and that the adjudicating authority had no discretion to impose a lesser penalty merely on equitable considerations.

Conclusion: The reduction of penalty by the appellate authority was not sustained.

Issue (ii): Whether, in an appeal under Section 35G of the Central Excise Act, 1944, the Court could sustain a penalty where the underlying rule had been declared ultra vires and non-existent.

Analysis: The decision applied the principle that statutory appellate jurisdiction must operate within the statute and cannot validate an assessment or penalty founded on a provision that is void or beyond legislative power. Once the governing rule was treated as struck down or non-existent, the demand could not be tested as a valid levy under the Act.

Conclusion: The challenge to the penalty did not succeed, and the appellate court declined interference with the tribunal's order.

Final Conclusion: The appeals failed, and the orders of the tribunal were left undisturbed on the footing that no interference was called for in the statutory appeal.

Ratio Decidendi: A statutory authority cannot sustain a levy or penalty under a provision that is void or ultra vires, and appellate jurisdiction under the taxing statute is confined to disputes arising under valid substantive provisions.

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