Proportional penalty for delayed excise duty payment must reflect the actual period of default, not a uniform formula.

Penalty for delayed payment of excise duty under Rule 96ZQ(5)(ii) must be assessed with reference to the actual length of the default and surrounding circumstances. A uniform penalty cannot be imposed without considering whether the delay was short or prolonged, because proportionality is an integral part of the penalty exercise. The authorities had failed to examine the period of delay before fixing penalty, so the penalty orders were set aside to that extent and the matter was remanded for fresh determination on the basis of the actual delay.

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Issues: Whether penalty imposed under Rule 96ZQ(5)(ii) for delayed payment of excise duty had to be reconsidered having regard to the extent of delay.

Analysis: Rule 96ZQ(5)(i) provided for interest on delayed payment, while clause (ii) provided for penalty for such delay. The quantum of penalty could not be treated as uniform irrespective of the duration of delay. The period of default and the surrounding circumstances had to be considered, because penalty for a short delay could not be equated with penalty for a much longer delay. The authorities had not considered the extent of delay before fixing the penalty.

Conclusion: The penalty orders were set aside insofar as they imposed penalty under Rule 96ZQ(5)(ii), and the matter was remanded for fresh determination of penalty in accordance with the stated principles.

Final Conclusion: The assessee succeeded to the extent that the existing penalty was quashed and the penalty issue was sent back for reconsideration on the basis of the actual delay.

Ratio Decidendi: Under Rule 96ZQ(5)(ii), penalty for delayed payment of duty must be proportionate to the length of the delay and cannot be determined without considering the period of default.

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