Mandatory minimum excise penalty without mens rea may be reduced when no intent to evade duty is shown.

Penalty under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944 was treated as capable of reduction where the record did not show any intention to evade duty. The analysis notes that the Supreme Court had not finally settled the vires of Rule 96ZO(3) in the decisions relied on, while a later High Court view considered a mandatory minimum penalty without mens rea and without discretion to be arbitrary and an excessive restriction. On the facts, the Commissioner (Appeals) was justified in reducing the penalty after considering the overall circumstances, and the Revenue's challenge failed.

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Issues: Whether the penalty under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944 was mandatory and could be reduced where the facts did not indicate any intention to evade duty.

Analysis: The legality of Section 3A and Rule 96ZO had been noticed, but the question of vires of Rule 96ZO(3) had not been concluded by the Supreme Court in the decisions relied upon. The Tribunal relied on the later High Court view that the provision, to the extent it prescribed a mandatory minimum penalty without mens rea and without discretion, was arbitrary and an excessive restriction. On the facts, the record did not show an intention to evade payment of duty, and the Commissioner (Appeals) had taken the overall circumstances into account while reducing the penalty.

Conclusion: The reduction of penalty to Rs. 25,000/- was justified and the Revenue's challenge failed.

Ratio Decidendi: Where the facts do not disclose intent to evade duty, and the validity of a rule prescribing mandatory minimum penalty without mens rea remains open or is held unreasonable, the appellate authority may sustain reduction of penalty despite the default in payment of excise duty.

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