Maximum penalty is not mandatory under Rule 96ZP(3); authority may impose a lesser penalty on facts.

Where Rule 96ZP(3) prescribes only a maximum penalty, the competent authority may impose a lesser penalty on a reasoned assessment of the facts and circumstances; the maximum is not mandatory in every case. The Court treated the statutory ceiling as discretionary, followed the construction adopted for an analogous penalty provision, and read Sony India Limited as not establishing an absolute rule of maximum punishment. On that basis, the Tribunal's reduction of penalty was upheld and the revenue's challenge failed.

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Issues: Whether penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 is mandatory at the maximum level or whether the authority has discretion to impose a lesser penalty depending on the facts and circumstances of the case.

Analysis: The Court followed the earlier view that provisions using language prescribing penalty up to a specified maximum do not necessarily require imposition of the maximum in every case. Relying on the construction placed on the analogous provision in Section 7(5) of the Entry Tax Act and the Supreme Court's treatment of penalty as a ceiling rather than a fixed levy, the Court held that the appellate tribunal could reduce the penalty where the circumstances justified such reduction. The Court also read the decision in Sony India Limited as not laying down an absolute rule that the maximum penalty must invariably be imposed whenever the statute permits it.

Conclusion: The authority has discretion to impose a lesser penalty under Rule 96ZP(3), and the reduction of penalty by the Tribunal was upheld.

Final Conclusion: The revenue's challenge to the reduction of penalty failed, and the penalty order as modified by the Tribunal was sustained.

Ratio Decidendi: Where the statutory penalty provision prescribes a maximum amount, the competent authority may impose a lesser penalty on a reasoned assessment of the facts and circumstances, and the maximum cannot be treated as mandatory in every case.

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