Disproportionate penalty for delayed duty payment reduced where interest was paid and no pecuniary advantage remained.

Delayed payment of duty under Rule 173GG(3) attracted interest and penalty, but the penalty power was discretionary and had to stay within the proviso limiting duty, interest and penalty to the value of clearances. Because the duty default was small and the interest payment had already neutralised any pecuniary benefit from the delay, a grossly disproportionate penalty was held unwarranted. The penalty was therefore reduced to a nominal amount, and the appeal succeeded to that extent.

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Issues: Whether the penalty imposed for delayed payment of duty under Rule 173GG(3) was excessive and required reduction.

Analysis: The delayed duty was admittedly paid along with interest. The provision fixes liability to interest and penalty for default, but also contains a proviso limiting the total of duty, interest and penalty to the value of clearances. The penalty clause was treated as enabling the authorities to impose an appropriate amount within the permissible limit, and not as mandating a mechanical levy of the full amount irrespective of the facts. Since the delay caused only a small duty default and the interest payment had neutralised the pecuniary advantage of delay, a grossly disproportionate penalty was held to be unwarranted.

Conclusion: The penalty was reduced to a nominal amount of Rs. 350, and the appeal was allowed to that extent.

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