Mandatory penalty under excise rules cannot be reduced below duty short paid once statutory conditions are met.

Rule 96ZO(3) of the Central Excise Rules, 1944 was interpreted as leaving no discretion to reduce a penalty below the amount of duty short paid or not paid. The default in duty payment was undisputed, and the challenge was confined to whether the adjudicating authority could impose a lesser penalty on equitable grounds. Applying binding precedent, the Court held that once the statutory condition is attracted, the penalty prescribed by the rule is mandatory and cannot be scaled down. The enhanced penalty was therefore upheld.

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Issues: Whether, under Rule 96ZO(3) of the Central Excise Rules, 1944, the adjudicating authority had discretion to impose a penalty lower than the amount of duty short paid or not paid.

Analysis: The default in payment of duty was undisputed, and the challenge did not involve the validity of Rule 96ZO. The only question was whether the authority could reduce the penalty below the amount prescribed by the rule. The rule language, as interpreted in binding precedent, requires penalty equal to the duty short paid or not paid, leaving no discretion to impose a lesser penalty. The Court followed the settled position that once the statutory condition is attracted, the penalty is mandatory and cannot be scaled down on equitable considerations.

Conclusion: The adjudicating authority had no discretion to impose a penalty lower than the amount of duty short paid or not paid under Rule 96ZO(3); the enhanced penalty was therefore justified.

Final Conclusion: The appeal was rejected and the impugned order maintaining the higher statutory penalty was upheld.

Ratio Decidendi: Where the statute prescribes a penalty equal to the duty short paid or not paid, the authority has no discretion to impose a lesser penalty.

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