Penalty proceedings cannot be freshly initiated by a superior authority after quasi-judicial assessment omits penalty without statutory review.

Where the assessing authority had power to impose penalty while adjudicating RT-12 returns but chose not to do so, that omission was treated as a discretionary decision against penalty. In the absence of correction under the statutory review mechanism, a superior authority could not start a fresh penalty proceeding under Rule 173Q, because that would amount to an impermissible review of a quasi-judicial assessment. An unexplained delay of more than two years in issuing the show-cause notice further undermined the penalty. The penalty proceeding was held unsustainable and the penalty was set aside.

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Issues: Whether the Collector could initiate independent penalty proceedings under Rule 173Q after the Superintendent had assessed the RT-12 returns without imposing penalty.

Analysis: The excess duty-related amounts had been disclosed to the Department only belatedly, and the duty was paid after detection. The Superintendent, while exercising assessment powers over the RT-12 returns, had the authority to invoke penal action under Rule 173Q but did not do so. That omission was treated as an exercise of discretion against penalty. In the absence of recourse to the correctional jurisdiction contemplated by Section 35E(2), the Collector could not superimpose a fresh penal proceeding, as that would amount to an impermissible review of the Superintendent's quasi-judicial order. The unexplained delay of more than two years before issuing the show cause notice further weighed against the sustainability of the penalty.

Conclusion: The independent penalty proceeding initiated by the Collector was not sustainable in law, and the penalty could not be sustained.

Final Conclusion: The appeal was allowed and the penalty order was set aside.

Ratio Decidendi: Where the assessing authority, vested with power to impose penalty in the course of adjudication, has not invoked that power, a superior authority cannot commence a fresh penalty proceeding as a substitute for statutory correctional review; such action amounts to an unauthorised review of the earlier quasi-judicial assessment.

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