Judgment 1. We have heard learned counsel appearing for the parties. 2. This D.B. Excise Appeal, preferred by the Commissioner, Central Excise, Jaipur, was admitted on the following substantial questions of law:- “1. Whether imposition of penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 equal to the amount of duty not paid during the stipulated period is mandatory? 2. Whether the Tribunal committed error in reducing the penalty without adverting to the facts and circumstances of the case?” 3. Learned counsel appearing for the Commissioner, Central Excise Department, submits that the question is no longer res integra, inasmuch as in Commr. Of Cus. And Cen. Exc., Coimbatore Vs. Kannapiran Steel Re-Rolling Mills, 2011(263) E.L.T. 22(S.C.), decided on 02.12.2010, a two Judges Bench of the Hon'ble Supreme Court decided the same question, following the judgment of a three Judges Bench of the Court in Union of India and Others Vs. Dharmendra Textile Processors and Others, (2008) 13 SCC 369 , and held as follows:- “8. Counsel submits that in the said decision what was interpreted by this Court was Rule 96-ZQ and Rule 96-ZO. Counsel also submits that what is applicable to the facts and circumstances of the present case is Rule 96-ZP which is also pari materia and identical with that of Rule 96-ZQ and Rule 96-ZO. 9. In order to appreciate the aforesaid contentions of the counsel appearing for the appellant, we have perused the provisions of Rule 96-ZP and compared the said provisions with that of Rule 96-ZQ and Rule 96-ZO. On such appreciation and comparison what we find is that the provisions of Rule 96-ZP are pari-materia and are identical with that of Rule 96-ZQ and Rule 96-ZO. 10. In Dharmendra's case (supra), this Court referred to the Union Budget of the year 1996-1997 wherein Section 11-AC of the Act was introduced and therein a position was made clear that there is no scope for any discretion. This Court also referred to Para 136 of the Union Budget in which reference was made to the provisions stating that the levy of penalty is a mandatory penalty and that in Notes on Clauses also the similar indication has been given. 11. This Court also referred to Para 136 of the Union Budget in which reference was made to the provisions stating that the levy of penalty is a mandatory penalty and that in Notes on Clauses also the similar indication has been given. 11. After considering all the concerned aspects, this Court finally held that the plea that Rule 96-ZQ and Rule 96-ZO have a concept of discretion inbuilt cannot be sustained meaning thereby that the said Rules are mandatory and there is no discretion available for reducing the penalty. Provisions of Rule 96-ZP being identical and pari materia with that of Rule 96-ZQ and Rule 96-ZO, the ratio of the aforesaid decision rendered by Three Judges Bench is squarely applicable to the facats and circumstances of the present case. Consequently, we allow these appeals and set aside the order passed by the High Court as also by the Tribunal and restore the order passed by the adjudicating authority, leaving the parties to bear their own costs.” 4. It is submitted that the judgment in Kannapiran Steel Re-Rolling Mills(supra), has been consistently followed by the Hon'ble Supreme Court in the matters of levy of penalty under Rules 96-ZO, 96-ZP and 96-ZQ of the Central Excise Rules, 1944 (for short, 'the Rules'). These Rules have been omitted since 11.05.2001, the penalties imposed under these Rules, however, were subject matter of consideration before the Supreme Court, and are under consideration in these appeals. 5. It is submitted that the Supreme Court has consistently followed the view expressed in Kannapiran Steel Re-Rolling Mills (supra), in Commissioner of C.Ex., Hyderabad-III Vs. Prudential Spinners Ltd., 2011(267) E.L.T. 291(S.C.), and in Commissioner of C.Ex., Mumbai Vs. Sunil Silk Mills, 2011(267) E.L.T. 438(S.C.), both decided on 20.04.2011. 6. It is submitted by learned counsel appearing for the Commissioner, Central Excise, that Dharmendra Textile Processors' case (supra), has been followed in respect of penalties levied under Rules 96-ZO, 96-ZP and 96-ZQ of the Rules, and it has been held that there is no inbuilt discretion under the Rules, to attract the principles of mens rea, or to reduce the penalty. 7. It is submitted that Dharmendra Textile Processors and Others (supra), case was explained in Union of India Vs. Rajasthan Spinning & Weaving Mills, 2009(238) E.L.T. 3 (S.C.), in which the correctness of the view expressed in Dilip N. Shroff Vs. 7. It is submitted that Dharmendra Textile Processors and Others (supra), case was explained in Union of India Vs. Rajasthan Spinning & Weaving Mills, 2009(238) E.L.T. 3 (S.C.), in which the correctness of the view expressed in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr., 2007(8) SCALE 304, was considered, and with reference to Section 11AC of the Central Excise Act, 1944, it was held in paragraph 23 as follows:- “23. The decision in Dharmendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penaly must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharmendra Textile decides.” 8. In paragraph 24 however the Supreme Court made it clear that what is stated by it in paragraph 23 in regard to the decision in Dharmendra Textile, in only in so far as Section 11AC is concerned. The Court did not make any observations with regard to the several other statutory provisions that came up for consideration in that decision, and thus, it is submitted that Rules 96-ZO, 96-ZP and 96-ZQ of the Rules, which are pari materia and identical, and which have been explained in Kannapiran Steel Re-Rolling Mills (supra), do not admit any discretion to reduce the penalty. 9. It is submitted on behalf of the Central Excise Department that in Commissioner of C.Ex., Hyderabad-III Vs. Prudential Spinners Ltd. (supra), where distinction was sought to be drawn with reference to Union of India Vs. Rajasthan Spinning & Weaving Mills (supra), as well as Commissioner of Customs and Central Excise Vs. Lanco Industries Ltd., 2009(13) SCC 448 , the Supreme Court observed that a similar submission was made contending that there was no warrant for levy of penalty since the assessee had deposited balance amount of excise duty that was short paid at the first instance and that too even before the show cause notice was issued. The Tribunal upheld the contention, which was set aside by the Supreme Court in Union of India Vs. The Tribunal upheld the contention, which was set aside by the Supreme Court in Union of India Vs. Rajasthan Spinning & Weaving Mills (supra), and since the submission was of identical nature, it was only to be rejected in view of the findings recorded by the Court that once the section is held to be applicable in a case, the authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under subsection (2) of Section 11A. On a consideration of the factual position in that case, the Supreme Court held that the Tribunal was not justified in reducing the quantum of penalty, as penalty under the provisions of the Act must be imposed equal to the duty determined under sub-section (2) of Section 11A. 10. On the strength of the aforesaid decisions of the Supreme Court, against which no contrary opinion has been expressed so far, it is submitted that there is no question of mens rea, nor any discretion is vested in the authority, to reduce the penalty. 11. Learned counsel appearing for the assessee, on the other hand, submits that the Punjab & Haryana High Court has, after considering the judgments in Dharmendra Textile Processors and Others (supra), and Union of India Vs. Rajasthan Spinning & Weaving Mills (supra), in Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India, (2010) 260 ELT 343 , decided on 08.11.2010, relying on the principle of proportionality, held in paragraphs 15 to 17 as follows:- “15. Applying the above principles to the present situation, the provision for minimum mandatory penalty equal to the amount of duty even for slightest bona fide delay without any element of discretion is beyond the purpose of legislation. The object of the rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, an can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional Scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. 16. In the Indian Constitutional Scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. 16. Conclusion for the above reasons, we hold that the impugned provision to the extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default with intent to evade duty. 17. The writ petitions of the assessees are allowed and impugned provisions in Rules 96(ZO), (ZP) and (ZQ) permitting minimum penalty for delay in payment, without any discretion and without having regard to extent and circumstances for delay are held to be ultravires the Act and the Constitution. In CWP No.8555 of 2010, penalty has been sustained by the Tribunal to the extent of 100% which will stand quashed without prejudice to any fresh order being passed in accordance with law. It is made clear that if penalty has attained finality in CWP No.18099 of 2009 upto this Court, this order will not affect the finality of such order. The appeals filed by the revenue against the orders of the Tribunal sustaining penalty proportionate to the default will stand dismissed.” 12. It is submitted that the Uttaranchal High Court in Commissioner, Customs & Central Vs. M/s Amrit Varsha Ispat (P) Ltd., (Excise Appeal No.3/2010), decided on 11.10.2011, relying on Dharmendra Textile Processors and Others(supra), held that the Supreme Court in Dharmendra Textile Processors and Others(supra), had left the issue of vires of Rule 96ZO, open, to be dealt with by the High Court, which was eventually decided by the Punjab & Haryana High Court in Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India (supra), and in which, it was held that there cannot be any equal amount of penalty without mens rea being established. In Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India (supra), and in which, it was held that there cannot be any equal amount of penalty without mens rea being established. In Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India (supra), the Punjab & Haryana High Court held that Rule 96ZO imposes an unreasonable restriction, which is violative of Section 37 of the Act and which clearly provides that a Rule can be framed only to the extent that it contravenes the provision of any such Rule with intent to evade payment of duty. 13. In Krishna Processors Vs. Union of India, (2012) 2 GCD 1607 , the Gujarat High Court followed the same reasoning, as was adopted by the Punjab & Haryana High Court in Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India(supra), that the rigidity of Rule 96ZQ(5)(ii) inasmuch as it does not leave any discretion, is violative of Article 14 of the Constitution of India. The Gujarat High Court held that the provision for minimum mandatory penalty equal to the amount of duty even for slightest bonafide delay without any element of discretion is beyond the purpose of legislation. The object of the Rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, an assessee can be punished or a penalty could be imposed, is a blanket power without any justification. The Court held the provisions of Rules 96ZO, ZP and ZQ, permitting penalty for delay in payment, without any discretion and without having regard to the extent and circumstances for delay, is ultra vires the Act and the Constitution. 14. We are informed that a Special Leave Petition has been admitted and notices have been issued against the judgment of Punjab & Haryana High Court in Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India (supra). 15. An objection has been taken by learned counsel appearing for the Central Excise Department that the vires of the Rules have not been challenged by the assessee, and thus, in the appeal filed by the Department, the vires cannot be questioned that it violates the principles of proportionality, and is consequently violative of Article 14 of the Constitution of India. 16. 16. We find substance in the contention of learned counsel appearing for the assessee that since the High Courts administer both, the Central and the State laws, and that the Punjab & Haryana High Court has declared the provisions of Rules 96-ZO, 96-ZP and 96-ZQ of the Rules, as these Rules were existing at that time, to be ultra vires Article 14 of the Constitution of India, vide its judgment dated 08.11.2010, which has been followed by the Uttaranchal High Court, and the Gujarat High Court, and that these High Courts have consistently held that the provisions of Rules 96-ZO, 96-ZP and 96-ZQ of the Rules, in so far as they do not admit any discretion in levy of penalty, are ultra vires Article 14 of the Constitution of India, and that a Special Leave Petition against the judgment has not been decided so far, the Rules declared ultra vires, cannot be relied by the Department of Central Excise to submit that there is no inbuilt discretion under these Rules, and thus, penalty in view of Dharmendra Textile Processors and Others' case(supra), must be levied, equal to the amount of duty of the relevant period. 17. In the present case, the assessee, engaged in the manufacturing of M.S. Ingots/Billets of Non Alloy Steel, was in default of Rule 96-ZO(3) of the Rules for delay in depositing the duty, which was paid on later dates. The show cause notices were issued under Rule 96-ZO(3) and 209 of the Rules, in which the demand of interest amount of Rs.24,095/- was liable to be paid, at the same time, attracting violation of the Rule 96-ZO(3) of the Rules, a penalty of Rs. 57 lacs was imposed by the order-in-original. 18. In appeal, the Commissioner (Appeals-I), reduced the penalty to Rs.5 lacs. The Customs, Excise & Service Tax Appellate Tribunal, New Delhi (CESTAT), vide its judgment dated 23.08.2005, relying upon Mool Chand Steels Pvt. Ltd. Vs. CCE, Meerut, (Final Order No.265/05-NB, dated 24.11.2004), reduced the penalty to an amount of interest, at Rs.26,000/-. 19. We do not find that in the judgments cited by the Central Excise Department, the question of vires of the Rules was considered. The judgments were rendered in view of Dharmendra Textile Processors' case (supra), which was later on explained in Union of India Vs. 19. We do not find that in the judgments cited by the Central Excise Department, the question of vires of the Rules was considered. The judgments were rendered in view of Dharmendra Textile Processors' case (supra), which was later on explained in Union of India Vs. Rajasthan Spinning & Weaving Mills (supra), and in which, it was clearly stated by the Supreme Court that the judgment in Dharmendra Textile Processors' case (supra), was relevant only for the purpose of Section 11AC of the Central Excise Act, and that so far as several other statutory provisions are concerned, the Court is not making any observations. 20. In our opinion, once the Rule has been declared ultra vires by the High Court, having competent jurisdiction to provide such determination, the same Rule cannot be relied on for the purposes of imposing penalty, equal to the amount of central excise duty of the relevant period. 21. The question of law is, thus, decided in favour of the assessee and against the Central Excise Department. 22. All the appeals are, accordingly, dismissed. 23. A copy of the judgment be placed in the connected files.