Reasonable time limitation bars belated penalty proceedings under Rule 96ZP(3), with penalty deletion upheld.

Penalty proceedings under Rule 96ZP(3) of the Central Excise Rules, 1944 must be initiated within a reasonable time even where no express limitation period is provided. Applying the view that five years is a reasonable period for commencing such action, the Court held that proceedings started after that period were not sustainable. The revenue's reliance on a contrary decision did not assist it because that decision also recognised the need for action within a reasonable time when the statute is silent. Deletion of the penalty was therefore upheld in favour of the assessee.

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Issues: Whether penalty proceedings initiated under Rule 96ZP(3) of the Central Excise Rules, 1944 after five years from the relevant date were barred by a reasonable period of limitation and, therefore, whether deletion of penalty was justified.

Analysis: The appeal arose from an order deleting penalty imposed for delayed payment under the compounded levy scheme. The Court noted that although the rules did not prescribe a specific limitation period, proceedings for penalty must be initiated within a reasonable time. Reliance was placed on the principle that where a statute is silent on limitation, courts may still insist on action being taken within a reasonable period. Applying the earlier view that five years is a reasonable period for initiating such proceedings, the Court found that the penalty action in the present case was commenced beyond that period. The contrary reliance on the decision cited by the revenue did not assist it, as that decision also recognised the concept of reasonable time where no express limitation exists.

Conclusion: The initiation of penalty proceedings after five years was not sustainable, and the deletion of penalty was upheld in favour of the assessee.

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