Discretionary penalty under Central Excise rules treated as a maximum cap, not a mandatory levy

Penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules was construed as discretionary, with the prescribed amount treated as a maximum rather than a mandatory levy. Applying an earlier Gujarat High Court view, the authority was required to consider the facts and circumstances before fixing penalty, and penalty could not be imposed merely for procedural non-compliance. The penalty order was quashed and the matter remanded for reconsideration in accordance with law.

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Issues: Whether penalty imposed under Rule 96ZQ(5)(ii) of the Central Excise Rules could be sustained in the facts of the case and whether the authority was bound to impose the full amount prescribed under the Rule.

Analysis: The matter was held to be covered by an earlier decision of the same Court, which had read Rule 96ZQ(5)(ii) in a reasonable manner. The prescribed amount of penalty was treated as only the maximum that could be levied, leaving discretion with the assessing authority to impose a lesser penalty depending on the facts and circumstances. The Court also relied on the principle that penalty should not be imposed merely because of non-compliance with a procedural requirement.

Conclusion: The penalty order under Rule 96ZQ(5)(ii) was quashed and the matter was remanded for reconsideration of penalty in accordance with law.

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