Penalty discretion under Rule 96ZP(3) sustained where duty and interest were paid before adjudication.

Penalty under Rule 96ZP(3) was examined in light of conflicting views on whether the phrase "shall be liable to" requires a penalty equal to the duty short-paid in every case. The analysis notes that the assessee had paid the outstanding duty with interest before adjudication, and the appellate authority treated the prescribed amount as a maximum rather than an inflexible minimum. On those facts, a reduced penalty was considered justified and the revenue's challenge to that reduction failed. The operative principle stated is that, where the provision is framed in similar terms, the authority may impose a lesser penalty in an appropriate case based on the proven facts.

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Issues: Whether penalty under Rule 96ZP(3) was required to be imposed at an amount equal to the duty short-paid, or whether the adjudicating authority had discretion to impose a lesser penalty in the facts of the case.

Analysis: The penalty provision was considered in the context of conflicting judicial views on whether the expression "shall be liable to" made the penalty invariably equal to the duty short-paid. The respondent had already paid the outstanding duty with interest before adjudication, and the Commissioner (Appeals) reduced the penalty after treating the prescribed amount as a maximum limit rather than an inflexible minimum. In view of the divergence of opinion and the facts showing voluntary payment before adjudication, the reduction in penalty was found to be justified.

Conclusion: The penalty under Rule 96ZP(3) was not held to be compulsorily equal to the duty short-paid in every case, and the reduced penalty was sustained.

Final Conclusion: The revenue's challenge to the reduction of penalty failed, and the impugned appellate order was upheld.

Ratio Decidendi: Where the penalty provision is couched in terms analogous to "shall be liable to", the authority may treat the prescribed amount as a maximum in an appropriate case and impose a lesser penalty on the facts proved.

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