Penalty under the compounding scheme cannot be reduced once statutory default is established and the rule leaves no discretion.

Rule 96ZP penalty could not be reduced once the statutory default was established under the compounding scheme. The assessee had elected the scheme but failed to make the required monthly payments, and the rule did not give the appellate authority discretion to scale down the penalty. The HC upheld the Tribunal's view that the Commissioner (Appeals) lacked power to interfere with the quantum of penalty in such circumstances, and the assessee's challenge failed. The full penalty was therefore sustained in favour of the Revenue.

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Issues: Whether penalty imposed under Rule 96ZP of the Central Excise Rules, 1944 could be interfered with by reducing its quantum, and whether the assessee's challenge to the penalty was liable to succeed.

Analysis: The assessee had opted for the compounding scheme and was required to make monthly payments, but defaulted in complying with that obligation. The scheme and the rule governing the penalty did not confer discretion on the appellate authority to scale down the penalty once the statutory default was established. The Tribunal's view that the Commissioner (Appeals) had no power to reduce the quantum of penalty was upheld, and the questions framed by the assessee were answered against it.

Conclusion: The challenge to the penalty failed and the decision sustaining the full penalty was affirmed in favour of the Revenue.

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