Compounded levy short payment upheld, but firm penalty reduced and personal penalties deleted for lack of direct abetment.

Duty short-levied under the compounded levy scheme was sustained because the assessee had miscalculated liability under Rule 96ZI by treating three-shift production as two-shift production, and the short levy was made good only after departmental detection. The firm's penalty was also warranted on the admitted default, but the quantum was reduced in view of the circumstances. Personal penalties could not be sustained against the individual appellants where no direct abetment or sufficient material of personal involvement was recorded; those penalties were set aside.

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Issues: (i) Whether the confirmation of duty short-levied under the compounded levy scheme was sustainable. (ii) Whether the penalties imposed on the firm and on the individual appellants were liable to be sustained, reduced, or set aside.

Issue (i): Whether the confirmation of duty short-levied under the compounded levy scheme was sustainable.

Analysis: The assessee had miscalculated duty under Rule 96ZI of the Central Excise Rules, 1944 by treating the production as two-shift production when, in fact, it was running in three shifts. The short levy was accepted and made good only after the department detected the discrepancy. On these facts, there was no defence to the duty demand.

Conclusion: The confirmation of the duty short-levied was upheld.

Issue (ii): Whether the penalties imposed on the firm and on the individual appellants were liable to be sustained, reduced, or set aside.

Analysis: The penalty on the firm was considered with reference to the admitted short levy and the fact that the default was not regularised until after departmental detection. While penalty was warranted, the circumstances justified reduction in quantum. As regards Shri Sandeep Mehra, the adjudicating authority itself recorded no evidence of direct abetment, so no penalty could stand against him. As regards Shri Mukesh Sehgal, he was described as a trainee and the material did not justify personal penalty in the circumstances.

Conclusion: The firm's penalty was reduced to Rs. 60,000, while the penalties on Shri Sandeep Mehra and Shri Mukesh Sehgal were set aside.

Final Conclusion: The duty demand remained intact, but the penal consequences were modified by reducing the firm's penalty and deleting the personal penalties.

Ratio Decidendi: Where duty short levy is admitted and corrected only after detection, confirmation of duty and some penalty may be sustained, but personal penalties require evidence of direct involvement or abetment.

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