Mandatory penalty under Rule 96ZQ cannot be reduced once delayed duty payment attracts the statutory levy.

Rule 96ZQ of the Central Excise Rules, 1944 imposed a mandatory penalty once the prescribed conditions for delayed payment of compounded duty were satisfied. Because the duty was admittedly not deposited within the time required by Rule 96ZQ(3), the consequences under Rule 96ZQ(5)(ii) followed automatically. The High Court applied its earlier binding view that, where the rule fixes the penalty at the amount of the outstanding duty, neither the adjudicating authority nor the Tribunal can reduce or waive it on equitable grounds. The Tribunal therefore had no discretion to set aside or diminish the penalty.

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Issues: Whether, under Rule 96ZQ of the Central Excise Rules, 1944, the adjudicating authority or the Tribunal had discretion to reduce or set aside the penalty leviable for delayed payment of compounded duty.

Analysis: The respondent had admittedly failed to deposit the compounded duty within the time prescribed by Rule 96ZQ(3), thereby attracting the consequences prescribed in Rule 96ZQ(5)(ii). The Court applied its earlier view that where the statute prescribes a penalty equal to the duty outstanding, the quantum is not left to administrative discretion. The reliance placed on the Madras High Court decision was held to be misplaced because the question was already covered by this Court's later binding decision, which treated the penalty as mandatory once the statutory conditions for levy were satisfied.

Conclusion: The Tribunal had no discretion to set aside or reduce the penalty under Rule 96ZQ(5)(ii); the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where the statutory conditions for levy are fulfilled and the rule prescribes penalty in a fixed measure, the adjudicating authority and the Tribunal cannot vary or reduce the quantum on equitable grounds.

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