Penalty for delayed duty payment may be reduced where the lapse was unintentional and promptly regularised.

Penalty for delayed payment of duty under Rule 96ZQ(5) was held capable of reduction where the default was one day late, interest was paid, and the delay was explained by the bank's refusal to accept cash on the due date. Although the provision was couched in mandatory terms, the Tribunal applied the principle that discretion may still exist to impose a lesser penalty in an unintentional lapse, including by reference to the approach adopted in relation to Section 11AC. The penalty was reduced substantially in favour of the assessee.

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Issues: Whether the penalty imposed for delayed payment of duty under Rule 96ZQ(5) of the Central Excise Rules, 1944 could be reduced in the facts of the case.

Analysis: The duty was paid one day late with interest, and the delay was explained as arising from the bank's refusal to accept cash on the due date. Although the sub-rule speaks in mandatory terms, the Court treated the lapse as unintentional and relied on the principle that even where penalty is prescribed, the authority retains discretion to impose a lesser penalty. Reference was made to the Tribunal's view that such discretion can exist even in the context of Section 11AC of the Central Excise Act, 1944.

Conclusion: The penalty was reduced from Rs. 7.5 lakhs to Rs. 5,000, and the issue was decided in favour of the assessee.

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