Penalty must match the offence: Tribunal treated non-consideration of quantum as a rectifiable mistake and reduced the penalty.

Omission to consider the quantum of penalty under the Central Excise Rules was treated as a mistake apparent from the record where the assessee had specifically challenged the penalty, including the absence of mens rea and mala fides. The Tribunal applied the principle that penalty must be commensurate with the offence and noted that the substantive relief on Modvat credit reduction justified corresponding reconsideration of penalty in the interest of justice. The rectification was therefore allowed and the penalty was reduced from Rs. 1.5 lakhs to Rs. 1 lakh.

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Issues: Whether the penalty imposed under the Central Excise Rules required reduction in rectification proceedings where the original order had not recorded any finding on the quantum of penalty despite the assessee's specific challenge.

Analysis: The omission to examine the quantum of penalty was treated as a mistake apparent from the record because the appeal memorandum had specifically questioned the penalty under Rule 173Q of the Central Excise Rules and had asserted absence of mens rea and mala fides. The Tribunal applied the settled principle that penalty must be commensurate with the offence. Since the substantive relief had already reduced the disallowed Modvat credit, the penalty also required corresponding reconsideration in the interest of justice.

Conclusion: The omission was held to be a rectifiable mistake and the penalty was reduced from Rs. 1.5 lakhs to Rs. 1 lakh.

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