Penalty under Rule 96ZQ must be discretionary and fact-sensitive, not automatic for procedural default.

Rule 96ZQ(5)(ii) was treated as imposing only a maximum penalty, leaving the authority discretion to impose a lesser penalty on the facts and circumstances. The governing principle applied was that penalty should not follow a procedural default automatically, without consideration of relevant circumstances. Because the penalty order did not show such consideration, the penalty component could not be sustained and was set aside, with the matter remanded for a fresh penalty determination in accordance with law and the earlier judgment.

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Issues: Whether the penalty imposed under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 could be sustained, and whether the matter required reconsideration by the authority in light of the governing principles on imposition of penalty.

Analysis: The controversy was treated as covered by an earlier decision of the Court, which had held that Rule 96ZQ(5)(ii) need not be struck down as ultra vires, but must be read reasonably so that the prescribed penalty operates only as the maximum limit and the authority retains discretion to impose a lesser penalty depending on the facts and circumstances. The Court also proceeded on the principle that penalty is not to be imposed merely for a procedural default without considering the relevant circumstances. Since the present order of penalty did not reflect such consideration, the impugned penalty part of the order could not stand.

Conclusion: The penalty portion of the order-in-original was quashed and set aside, and the matter was remanded to the authorities to pass a fresh order on penalty in accordance with law and the earlier judgment.

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