Compounded levy penalty under Rule 96ZP(3) must be fixed judicially, considering delay, circumstances and the duty involved.

Penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 is discussed in the context of delayed payment of duty under the compounded levy scheme. The text treats Section 11A of the Central Excise Act, 1944 as relevant to short-paid or unpaid duty and related penalty proceedings, while Section 3A read with Rule 96ZP(3) is described as an independent scheme. Where delay is admitted, penalty discretion must be exercised judicially by considering the amount involved, the length of delay, and surrounding circumstances. The liability to penalty is upheld, and the quantum may be moderated on facts rather than treated as fixed or automatic.

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Issues: Whether penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 was time-barred and, if not, what quantum of penalty was justified.

Analysis: The dispute arose from delayed payment of duty under the compounded levy scheme. The provisions of Section 11A of the Central Excise Act, 1944 were considered applicable to short-paid or unpaid duty and to penalty proceedings, while Section 3A of the Central Excise Act, 1944 read with Rule 96ZP(3) of the Central Excise Rules, 1944 was treated as an independent scheme. The delay in payment was admitted, and the penalty discretion under Rule 96ZP(3) was required to be exercised judicially, taking into account the amount involved, the extent of delay, and the surrounding circumstances.

Conclusion: The penalty was not held to be barred by limitation, and liability to penalty under Rule 96ZP(3) was upheld, but the quantum was reduced to Rs.10,000/-.

Final Conclusion: The Revenue's appeal succeeded only to the extent that the order setting aside the penalty was reversed, while the penalty was substantially reduced on the facts.

Ratio Decidendi: In proceedings under the compounded levy scheme, penalty under Rule 96ZP(3) is exigible on delayed payment of duty, and the extent of penalty must be fixed by a judicious assessment of the delay and relevant circumstances.

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