Mandatory equal-amount excise penalty for delayed payment was struck down for lacking mens rea and proportionality.

Mandatory equal-amount penalty for delayed central excise payment under Rule 96ZO(3) was held impermissible where it operated without mens rea and without any discretion to impose a lesser penalty. The Court reiterated that the rule-making power under Section 37 of the Central Excise Act, 1944 could not support a penalty regime divorced from intent to evade duty, and that penalty must be reasonable and proportionate to the facts of each case. A fixed 100% penalty for every delay, regardless of its extent or circumstances, was therefore not enforceable, and the challenge to the rule succeeded.

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Issues: Whether Rule 96ZO(3) of the Central Excise Rules, 1944 permitting penalty equal to the duty amount for delayed payment, without mens rea and without discretion to impose a lesser penalty, was valid and enforceable.

Analysis: The Court followed its earlier decision striking down the minimum mandatory penalty framework under Rules 96ZO, 96ZP and 96ZQ to the extent it imposed penalty equal to duty for even slight bona fide delay without any element of discretion. It reiterated that the rule-making power under Section 37 of the Central Excise Act, 1944 could not authorise a penalty regime divorced from intent to evade duty, and that penalty must remain reasonable and proportionate to the facts of each case. A fixed 100% penalty in every case, irrespective of the extent or circumstances of delay, was held impermissible.

Conclusion: Rule 96ZO(3) could not sustain a mandatory equal-amount penalty without mens rea and without discretion; the assessee's challenge succeeded and the matter had to be reconsidered in accordance with law.

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