Penalty under Rule 96ZO(3) can be reduced where mens rea is absent and duty with interest has already been paid.

Penalty equal to duty under Rule 96ZO(3) of the Central Excise Rules, 1944 was not treated as an invariable mandate where the facts did not disclose mens rea and the duty with interest had already been deposited. On that basis, the Tribunal could sustain a reduced penalty instead of the full amount equal to duty. The Court held that the Tribunal had jurisdiction to do so and found no legal error in the reduction of penalty, answering the reference against the Revenue.

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Issues: Whether the Tribunal had jurisdiction to reduce the penalty imposed under the erstwhile Rule 96ZO(3) of the Central Excise Rules, 1944, from an amount equal to duty to a lesser sum.

Analysis: The assessee had not withdrawn the option to operate under the scheme and had short-paid duty for the relevant period, but the entire duty demand with interest stood deposited. The penalty under Rule 96ZO(3) was not treated as an invariable consequence in every case; the Court held that equal penalty was not mandatory where the circumstances did not disclose the element of mens rea. The Tribunal's reduction of penalty was supported by the principle that, in the absence of mens rea and where duty with interest had already been paid, a lesser penalty could be sustained.

Conclusion: The Tribunal was justified in reducing the penalty, and its order did not suffer from any legal error.

Final Conclusion: The reference was answered against the Revenue and the Tribunal's order reducing the penalty was upheld.

Ratio Decidendi: Penalty equal to duty under Rule 96ZO(3) of the Central Excise Rules, 1944, is not inexorably mandatory and may be reduced where the case does not disclose mens rea and the duty with interest has been paid.

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