Provisional duty determination under Rule 96ZB(3) binds the assessee; penalty applies for non-compliance, but may be reduced on the facts.

Where duty liability is provisionally determined, the assessee must comply with that determination and payment based only on actual production does not avoid penalty under Rule 96ZB(3). The operative principle is that a provisional order remains binding until finally settled, so non-compliance can attract penal consequences. On the facts, however, the penalty was moderated because the final duty was later settled and the differential duty was paid with interest. The penalty was therefore reduced to Rs. 30,000.

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Issues: Whether penalty under Rule 96ZB(3) was leviable where duty was paid on the basis of actual production despite a provisional determination of annual capacity, and whether the penalty required reduction in the circumstances.

Analysis: Once a provisional order determining duty liability is made, the assessee is bound to pay the amount so determined. Payment on the basis of actual production, while the provisional determination remains operative, does not avoid liability to penalty under the rule. At the same time, the facts justified leniency because the final duty determination was later settled and the differential duty was paid with interest.

Conclusion: Penalty was held to be leviable, but it was reduced from the amount originally imposed to Rs. 30,000/- under Rule 96ZB(3).

Ratio Decidendi: Where duty liability has been provisionally determined, the assessee must comply with that determination and may be penalised for non-compliance, though the quantum of penalty may be moderated on the facts.

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