Penalty under Rule 96ZQ(5) treated as a maximum levy, allowing reduction on the facts of the case.

Rule 96ZQ(5) of the Central Excise Rules, 1944 was examined on whether the penalty for delayed duty payment by an independent processor is mandatory in the full amount of outstanding duty or only a maximum that may be moderated. The Tribunal applied the principle that a provision fixing penalty in definite terms may still operate as an upper limit, depending on its wording and context, rather than requiring automatic levy in every case. It accepted that the Commissioner (Appeals) could reduce the penalty, and treated the earlier contrary view relied on by the Revenue as not displacing that approach.

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Issues: Whether the penalty prescribed under Rule 96ZQ(5) of the Central Excise Rules, 1944 is mandatory in the full amount of duty outstanding, or only the maximum penalty which may be reduced having regard to the facts of the case.

Analysis: Rule 96ZQ(5) provides that where an independent processor fails to pay the duty by the specified date, he shall be liable to penalty equal to the duty outstanding or Rs. 5,000, whichever is greater. The Tribunal followed the principle that a statutory provision fixing a penalty in definite terms may, depending on its wording and context, prescribe only the upper limit rather than an inexorable levy in every case. It preferred the ratio that a provision couched in terms of liability to penalty equal to a stated amount can still leave room for discretion, and held that the earlier contrary view cited by the Revenue did not displace that principle.

Conclusion: Rule 96ZQ(5) lays down only the maximum penalty leviable, and the Commissioner (Appeals) was justified in reducing the penalty. The Revenue's appeals failed.

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