Mandatory minimum excise penalty without discretion is unsustainable where intent to evade duty is not shown.

A mandatory minimum penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 was held unsustainable where it operated without discretion and without examining whether the default involved intent to evade duty. The Court construed the rule-making power as permitting penalty only in cases of such intent, and found a fixed penalty equal to the duty, regardless of facts or circumstances, to be excessive, arbitrary and an unreasonable restriction. It reaffirmed that penalty cannot be mechanically fixed at 100% in every case; the Revenue's challenge failed and the reduced penalty in favour of the assessee was sustained.

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Issues: Whether the penalty imposed under Rule 96ZO(3) of the Central Excise Rules, 1944 could be sustained at a mandatory minimum level without discretion, even where the default in payment of duty was not shown to involve intent to evade duty.

Analysis: The rule-making power under the Act was construed as permitting penalty only where the assessee acted with intent to evade duty. A provision requiring minimum penalty equal to duty, regardless of the extent or circumstances of delay and without any discretion to impose a lesser penalty, was held to be excessive, arbitrary and an unreasonable restriction. The Court followed the earlier constitutional challenge to the same set of rules and affirmed that penalty cannot be mechanically fixed at 100% in every case, as each matter must depend on its own facts and circumstances.

Conclusion: The penalty could not be imposed as a mandatory minimum without discretion, and the Revenue's challenge failed.

Final Conclusion: The appeals were dismissed, and the reduction of penalty in favour of the assessee was sustained.

Ratio Decidendi: A penalty provision under subordinate legislation is invalid to the extent it mandates a minimum penalty without discretion, mens rea, or consideration of the facts and circumstances of the default, where the parent statute contemplates penalty only for intent to evade duty.

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