Mandatory excise penalty without discretion was treated as excessive and beyond subordinate legislative power.

Rule 96ZO(3) of the Central Excise Rules, 1944 was examined for imposing a mandatory penalty equal to the duty amount, without discretion and regardless of the extent or circumstances of delay. The provision was considered against the rule-making power under the Central Excise Act, 1944, and the earlier binding view that a minimum mandatory penalty for even bona fide delay, without mens rea or discretion, is excessive and unreasonable. It was noted that penalty under the compounded levy scheme could not rigidly be fixed at 100% of duty in every case, and that the authority must assess the facts of delay. The mandatory penalty provision was treated as beyond the permissible scope of subordinate legislation, and the assessee's position was upheld.

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Issues: Whether the mandatory penalty equal to the amount of duty under Rule 96ZO(3) of the Central Excise Rules, 1944, without discretion and without regard to the extent and circumstances of delay, could be sustained.

Analysis: The provision was examined in the light of the rule-making power under the Central Excise Act, 1944 and the earlier binding decision holding that a minimum mandatory penalty for even slight bona fide delay, without mens rea and without any element of discretion, is an excessive and unreasonable restriction. It was noted that penalty under the compounded levy scheme could not be imposed in a rigid manner in every case at 100% of the duty, and that the authority must have discretion to consider the facts and circumstances of the delay. Following the earlier decision, the mandatory penalty provision was treated as beyond the permissible scope of subordinate legislation.

Conclusion: The challenge to the penalty failed, the Tribunal's view in favour of the assessee was upheld, and the appeal by the revenue was dismissed.

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