Prospective application of penal provisions bars penalty for defaults occurring before the amended rule came into force.

A penal provision introduced by amendment operates prospectively unless the statute clearly makes it retrospective, so it cannot be used to punish defaults committed before it came into force. Applying that principle, penalty under Rule 96ZO(3) could not be sustained for a default relating to the period before 1-5-1998, when the provision commenced. The penalty levy was therefore unsustainable and the penalty order was set aside.

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Issues: Whether penalty could be imposed under Rule 96ZO(3) of the Central Excise Rules, 1944 for a default relating to a period prior to the date on which the penal provision came into force.

Analysis: The appeals concerned only the penalty component. The disputed default related to September 1997 to December 1997, whereas the penal provision in Rule 96ZO(3) came into force only with effect from 1-5-1998. A penal provision cannot be applied retrospectively unless the statute clearly so provides, and no material showed that the appellants had an opportunity to know and comply with the amended provision before its commencement. The reasoning adopted in the earlier Tribunal decision, followed in the matter, treated the amended penal provision as prospective and therefore not available to sustain penalty for the prior period.

Conclusion: Penalty under Rule 96ZO(3) could not be imposed for the pre-1-5-1998 period, and the levy was unsustainable.

Final Conclusion: The penalty order was set aside and the assessees succeeded in the appeals.

Ratio Decidendi: A penal provision introduced by amendment operates prospectively unless the statute expressly makes it retrospective, and it cannot be invoked to penalise defaults committed before the provision came into force.

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