Mandatory penalty rule under Central Excise law led the Supreme Court to remit vires challenges for fresh High Court consideration.

The earlier view that Rule 96ZQ(5)(ii) could be read down was displaced by the later binding decision in Union of India v. Dharmendra Textile Processors, which treated the penalty provision as mandatory. In light of that change, the challenge to the vires of the rule could not be finally determined in the appeals and required fresh consideration at the first instance. The Supreme Court therefore remitted the matters to the respective High Courts, permitting amendment of pleadings and directing expeditious completion of the proceedings.

---

---

Issues: Whether the challenge to the vires of Rule 96ZQ(5)(ii) of the Central Excise Rules could be finally decided in view of the later three-Judge Bench decision holding the rule mandatory, and whether the batch of appeals should be remitted to the High Courts for reconsideration.

Analysis: The earlier view that the rule could be read down was overtaken by the later binding decision in Union of India v. Dharmendra Textile Processors, which held the penalty provision to be mandatory. In consequence, the pending challenge to the validity of the rule before the High Courts revived and required fresh consideration at the first instance. The Supreme Court therefore declined to finally adjudicate the vires question in these appeals and instead restored the matter to the respective High Courts, with liberty to amend pleadings and complete them expeditiously.

Outcome: The batch of civil appeals was disposed of by remitting the matters to the respective High Courts for on the vires of Rule 96ZQ(5)(ii).

---