Invalid rule defeats excise penalty under Rule 96ZQ(5)(ii), even where levy payment timing was disputed.

Penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 is stated to be unsustainable where the rule had already been declared invalid. The note records that, once the provision itself was held invalid, no penalty could be imposed under it, even though the Revenue contended that the compounded levy had not been paid by month-end. The operative point is that invalidation of the rule defeats penalty action under that provision, and the assessee's liability to penalty was rejected.

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Issues: Whether penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 could be sustained when the rule had already been held invalid and the entire compounded levy was deposited by the end of the month.

Analysis: The issue was treated as covered by the binding view that Rule 96ZQ(5)(ii) was invalid. Once the rule itself had been declared invalid, no penalty could be imposed under that provision, irrespective of the factual contention regarding deposit of the compounded levy by the end of the month.

Conclusion: Penalty under Rule 96ZQ(5)(ii) could not be levied against the assessee, and the questions were answered in favour of the assessee and against the Revenue.

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