Penalty under Rule 96ZO(3) reduced where short payment was disclosed in returns and suppression was not proved.

Penalty under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944 was examined in the context of short payment disclosed in RT-12 returns. As the short payment was reflected in the returns, deliberate suppression with mala fide intent was not established. The provision authorising penalty equal to the duty liability on delay or short payment had already been held unconstitutional by the Punjab and Haryana High Court, so the Tribunal's reduction of penalty was found to be legally supportable. The reduced penalty was therefore sustained and the challenge to that order failed.

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Issues: Whether the penalty imposed under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944 was liable to be sustained or reduced.

Analysis: The short payment for the relevant period was reflected in the RT-12 returns, so the allegation of deliberate suppression with malafide intention was not made out. The penalty was imposed under the third proviso to Rule 96ZO(3), which provides for penalty equal to the duty liability on delay or short payment. That penal provision had already been held unconstitutional by the Punjab and Haryana High Court. In that backdrop, the reduction of penalty by the Tribunal did not suffer from any legal infirmity.

Conclusion: The reduced penalty was upheld and the challenge to the Tribunal's order failed.

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