'Penalty exceeded the amount applicable in the circumstances of the case'.
The circumstances being that the authority had no legal basis to demand a penalty from you as the 'owner' because they were not empowered to issue a new NTO to you pursuant to regulations 20(1) and 20(4)(b) of the General Provisions etc. Regulations because the precedent conditions in Regulation 5(4)(d) had not been met by the owner i.e. the authority was not in possession of a statement of liability signed by you or evidence that the owner was a 'vehicle-hire firm' and that a 'hiring agreement' (both defined terms) were in effect.
In this case, the authority have simply accepted the say-so of a leasing company that the vehicle in question was subject to a 3-year lease, however, this claim, even if correct, does not meet the legal standard required and therefore the authority's purported cancellation of that NTO was ultra vires and it must therefore follow that their issue of a new NTO was similarly unlawful.
As a thought.