High Court Voided Penalty Order, Orders Refund with Interest

The High Court declared the penalty order under Rule 96ZQ as void and ordered its refund with 6.5% interest from the date of the Apex Court's decision, following the Apex Court's ruling on the invalidity of the rule. The Court emphasized the prompt refund of the penalty amount, if already paid, within a specified timeframe.

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Issues:
Challenge to the validity of Rule 96ZQ of the Central Excise Rules, 1944; Confirmation of interest liability and penalty under Rule 96ZQ; Applicability of Rule 96ZQ as mandatory; Constitutional validity of Rule 96ZQ; Refund of penalty amount.

Analysis:
The petitioner filed a petition under Article 226 challenging the legality of Rule 96ZQ of the Central Excise Rules, 1944, seeking to declare it void. The Assistant Commissioner confirmed interest liability and imposed a penalty of Rs. 4.5 lakh under Rule 96ZQ(ii), a decision upheld in appeal and by the Division Bench of the High Court, which considered Rule 96ZQ as mandatory. However, the Apex Court in a previous case held interest and penalty provisions under Rules 96ZO, 96ZP, and 96ZQ invalid, rendering the penalty order unsustainable.

The petitioner's appeal was dismissed by the Apex Court, but it was noted that challenging the constitutional validity of Rule 96ZQ was still permissible. Citing the Apex Court's decision in another case, it was argued that Rule 96ZQ was invalid, leading to the submission that the penalty order should be set aside. The Court considered the Apex Court's ruling and concluded that the penalty imposed under Rule 96ZQ could not stand, necessitating its quashing.

The High Court declared the penalty order as void and inoperative in light of the Apex Court's decision on the invalidity of Rule 96ZQ. Consequently, the Court disposed of the petition by directing the refund of the penalty amount, if already paid, with an interest rate of 6.5% from the date of the Apex Court's decision. The judgment clarified that the petitioner was entitled to the refund since the date of the Apex Court's ruling, emphasizing the necessity for prompt refund within a specified timeframe.

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