Ultra vires penalty provision cannot survive once the underlying rule is struck down; Revenue's challenge failed.

Penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 could not be sustained because the rule had already been declared ultra vires by the Gujarat High Court and that position was followed in later decisions. The Tribunal held that once the source provision for the penalty was invalid, no enforcement of penalty could survive under it, and the special compounded levy scheme under Section 3A of the Central Excise Act, 1944 did not preserve the impugned penalty. The Revenue's challenge therefore failed and the order deleting the penalties was upheld.

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Issues: Whether penalty imposed under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 could be sustained after the rule had been struck down as ultra vires and whether the Revenue's appeals against deletion of penalty deserved interference.

Analysis: The matter was governed by the settled position that Rule 96ZQ had already been declared ultra vires by the Gujarat High Court, followed in later decisions, and that once the rule itself was invalid, no penalty could survive under it. The Tribunal also noted that the special compounded levy scheme under Section 3A of the Central Excise Act, 1944 did not save the impugned penalty provision from the effect of the striking down of the rule.

Conclusion: The penalty under Rule 96ZQ(5)(ii) could not be sustained and the Revenue's challenge failed.

Final Conclusion: The order setting aside the penalties was upheld and the Revenue's appeals were rejected.

Ratio Decidendi: Once the statutory rule under which penalty is imposed is held ultra vires, no penalty can be enforced under that rule.

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