Mandatory penalty under Rule 96ZO(3) cannot be reduced for absence of mens rea; original penalty restored.

Penalty under Rule 96ZO(3) of the erstwhile Central Excise Rules, 1944 was mandatory for failure to make timely payment, and the appellate authority had no discretion to reduce it on the ground that mens rea was not established. The statutory scheme, read with the Supreme Court principle that such penalty provisions do not permit reduction, meant the absence of mens rea was irrelevant to the prescribed consequence. The reduction ordered by the Commissioner (Appeals) was therefore set aside, and the penalty imposed by the adjudicating authority was restored in favour of the Revenue.

---

---

Issues: Whether the penalty imposed under Rule 96ZO(3) of the erstwhile Central Excise Rules, 1944 could be reduced by the appellate authority on the ground that mens rea was not established.

Analysis: The adjudicating authority had imposed penalty equal to the duty confirmed for failure to make timely payment. In view of the mandatory scheme of Rule 96ZO and the principle affirmed by the Supreme Court that such penalty provisions do not contain any discretion to reduce the penalty, the reduction made by the Commissioner (Appeals) could not be sustained. The absence of mens rea was held to be irrelevant to the statutory mandate.

Conclusion: The reduction of penalty was set aside and the penalty imposed by the adjudicating authority was restored, in favour of the Revenue.

---