Mandatory excise penalty for delayed duty payment held unsustainable where it imposed duty-equivalent penalty without discretion.

Punjab & Haryana HC noted that the mandatory penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 for delayed duty payment was unsustainable to the extent it required a penalty equal to the duty without discretion or regard to the delay's circumstances. The commentary relied on earlier authority that such a rigid compounded levy penalty was excessive, arbitrary, and beyond the permissible scope of the parent Act, and on later Supreme Court approval of the same principle. The revenue's challenge to reduction of penalty accordingly failed because no substantial question of law arose.

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Issues: Whether the mandatory penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 for delay in payment of duty could be sustained, and whether the revenue's appeal against reduction of penalty raised any substantial question of law.

Analysis: The issue was treated as concluded by earlier decisions holding that the provisions governing penalty for delayed payment under the compounded levy scheme could not impose a mandatory minimum penalty equal to the duty without any discretion, mens rea, or regard to the extent and circumstances of delay. The underlying reasoning was that such a rigid penalty regime was excessive, arbitrary, and an unreasonable restriction on fundamental rights, and that the rule-making power could not be used to impose penalty beyond the limits traceable to the parent Act. The Court also followed the subsequent Supreme Court approval of the same principle while striking down the corresponding rules to the extent they imposed mandatory penalties equivalent to duty.

Conclusion: The mandatory penalty provision was not sustainable to the extent it compelled penalty equal to the duty without discretion, and the revenue's appeal failed as no substantial question of law arose.

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