Mandatory penalty under Rule 96ZO(3) cannot be reduced on equitable grounds; matter remitted after later binding precedent.

A mandatory penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 could not be reduced on equitable grounds, because the provision left no discretion once its conditions were met. The Tribunal's reduction of penalty was therefore not sustainable in law. Later Supreme Court rulings clarifying the mandatory nature of the penalty were treated as controlling, and the earlier dismissal of a connected matter did not bar reconsideration. The matter was remitted for fresh decision in accordance with the governing legal position.

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Issues: (i) whether the Tribunal was justified in reducing the penalty imposed under Rule 96ZO(3) of the Central Excise Rules, 1944; (ii) whether the matter could be reconsidered in light of the later Supreme Court rulings on mandatory penalty despite the earlier dismissal of a connected tax case.

Issue (i): Whether the Tribunal was justified in reducing the penalty imposed under Rule 96ZO(3) of the Central Excise Rules, 1944.

Analysis: The penalty regime under Rule 96ZO and the allied provisions was examined in the light of the Supreme Court's decision holding that the provision operates as a mandatory penalty provision and that there is no in-built discretion to reduce the statutory penalty once the conditions for its application are satisfied. The Court noted that the Tribunal had reduced the penalty on equitable considerations, but the later clarification of the governing legal position indicated that such reduction could not stand as a matter of law.

Conclusion: The reduction of penalty by the Tribunal was not sustainable in law.

Issue (ii): Whether the matter could be reconsidered in light of the later Supreme Court rulings on mandatory penalty despite the earlier dismissal of a connected tax case.

Analysis: The Court treated the later Supreme Court pronouncements as controlling on the legal issue and held that the earlier dismissal of a connected matter did not prevent reconsideration of the present appeal. Since the applicable legal position had been clarified subsequently, the case required fresh examination by the appellate authority in accordance with that law.

Conclusion: The matter was required to be reconsidered afresh notwithstanding the earlier dismissal of the connected case.

Final Conclusion: The Tribunal's order reducing penalty was set aside and the matter was remitted for fresh decision in accordance with the controlling law on mandatory penalty.

Ratio Decidendi: Where a statutory penalty provision is mandatory, the adjudicating authority has no discretion to reduce the penalty on equitable grounds, and a matter may be remitted for reconsideration when subsequent binding precedent clarifies the governing legal position.

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