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2011 (2) TMI 1344 - HC - Central ExciseWhether penalty imposed under Rule 96ZQ(3) of erstwhile Central Excise Rules, 1944, can be reduced where a mandatory penalty equal to the duty is stipulated as per law? Held that - The controversy involved in the present case is no longer res integra inasmuch as, the same stands concluded by the decision in the case of Union of India v. Dharamendra Textiles Processors and Others (2008 (9) TMI 52 - SUPREME COURT), holding the levy of penalty under Rules 96ZQ and 96ZO of the Rules is mandatory, and that the plea that Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained, thus the Tribunal was not justified in reducing the penalty to ₹ 5,000/-. Appeal allowed.
Issues:
Challenge to order under Section 35G of Central Excise Act, 1944 regarding penalty reduction under Rule 96ZQ(3) of Central Excise Rules, 1944. Analysis: The appellant, Commissioner of Central Excise & Customs, challenged a Tribunal order imposing penalty under Rule 96ZO(3) of the Central Excise Rules, 1944. The substantial question of law was whether a penalty under Rule 96ZQ(3) can be reduced when mandatory penalty equal to duty is stipulated. The respondent, an assessee manufacturing excisable goods, operated under the Compounded Levy Scheme paying duty in installments. Show cause notices were issued for late duty payments, leading to penalty imposition and interest recovery by the adjudicating authority. The Tribunal, on appeal, found delays in payment due to holidays and reduced the penalty for one delayed payment from Rs. 3,77,779 to Rs. 5,000. The appellant contended that the Tribunal's decision conflicted with a Supreme Court ruling stating no discretion exists in Rules 96ZO and 96ZQ. Since the penalty is mandatory under Rule 96ZO, discretion to reduce it is not allowed. Despite no representation from the respondent, the facts were undisputed, and the penalty was imposed as per Rule 96ZO(3) which mandates a penalty equal to the outstanding duty or Rs. 5,000, whichever is greater. The controversy was settled by the Supreme Court in Union of India v. Dharamendra Textiles Processors and Others, holding that Rules 96ZQ and 96ZO mandate penalties without discretionary reduction. Therefore, the Tribunal's reduction of penalty to Rs. 5,000 was unjustified. The Court allowed the appeal, answering the question negatively, stating that the penalty under Rule 96ZO(3) cannot be reduced when a mandatory penalty equal to duty is prescribed by law.
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