Penalty Quantum Discretion Under Rule 96ZP(3) Allowed Reduction Where Full Penalty Was Not Mandatory

Rule 96ZP(3) was treated as fixing only the maximum penalty, not mandating automatic imposition of penalty at the full duty amount. Applying the Supreme Court's principle that liability to penalty may be compulsory while the quantum remains discretionary, the Tribunal held that the adjudicating authority could reduce the amount on the facts. Financial hardship and subsequent payment of duty with interest were relevant factors in fixing a lower penalty. The result was that 100% penalty was not compulsory and the penalty was reduced to Rs. 1.50 lakhs.

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Issues: Whether penalty under Rule 96ZP(3) was mandatory at 100% of the duty amount, and whether the quantum of penalty required reduction on the facts.

Analysis: The applicable penalty provision was read in the light of the Supreme Court's exposition that, where a provision creates liability to penalty, the levy of penalty is not discretionary but the amount to be imposed remains within the authority's discretion. The Tribunal applied the same principle to Rule 96ZP(3), treating it as a provision prescribing only the maximum penalty. It further noted the appellants' financial hardship and the subsequent payment of duty with interest while considering the appropriate quantum.

Conclusion: The authority was not bound to impose 100% penalty, and the penalty was reduced to Rs. 1.50 lakhs; the appeal was otherwise rejected.

Ratio Decidendi: Where a penalty provision fixes only the ceiling of penalty, the adjudicating authority has discretion to impose a lesser amount depending on the facts and circumstances of the case.

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