Penalty under Rule 96ZO(3) is discretionary, allowing a lesser levy based on the facts and circumstances.

Penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 is not a rigid, fixed levy equal to the full duty outstanding; the provision was treated as prescribing a maximum penalty, leaving discretion to impose a lesser amount on a case-specific assessment of the facts and circumstances. The Tribunal's reduction of penalty was therefore consistent with the scheme of the rule, supported by analogous statutory provisions recognising discretion in fixing penalty and fine. The departmental appeals were dismissed.

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Issues: Whether the penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 is mandatory at the full amount of duty outstanding, or whether the authority and the Tribunal may impose a lesser penalty having regard to the facts and circumstances of the case.

Analysis: The provision was treated as pari materia with the provision considered by the Supreme Court in the context of entry tax, where the stipulated penalty was held to be only the maximum penalty and not an inexorable fixed levy. On that footing, the Tribunal's reduction of penalty was held to be supported by the scheme of the rule. The Court also noted that analogous customs provisions recognise discretion in fixing penalty and fine within the statutory framework, and therefore the Tribunal's approach was not extraneous to the provision.

Conclusion: The penalty under Rule 96ZO(3) is not rigidly fixed at the full outstanding amount, and a lesser penalty can be imposed on the facts of the case. The departmental appeals were therefore dismissed.

Ratio Decidendi: Where the statute prescribes penalty in terms indicating a maximum amount, the authority retains discretion to impose a lesser penalty on a case-specific assessment of the circumstances.

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