Omission of parent provision and limits of delegated power defeated excise demand, interest, and penalty under Rule 96ZO(3).

Non-challenge to the capacity determination letter did not bar the appeal because the demand was raised under Rule 96ZO(3), not the earlier capacity order. Proceedings under the scheme could not continue after omission of Section 3A and Rule 96ZO without any saving provision, as subordinate legislation cannot survive the disappearance of its parent authority unless expressly preserved. The interest and penalty provisions in Rule 96ZO(3) were also beyond delegated rule-making power because substantive fiscal liabilities require clear statutory authority. The demand and consequential liabilities under the impugned scheme were therefore set aside, and the cross-objection became infructuous.

---

---

Issues: (i) Whether non-challenge to the capacity determination letter barred the appeal against demand raised under Rule 96ZO(3). (ii) Whether proceedings could continue after omission of Section 3A and Rule 96ZO and in the absence of any saving provision. (iii) Whether the provisions for interest and penalty under Rule 96ZO(3) were within the rule-making power under the Central Excise Act, 1944.

Issue (i): Whether non-challenge to the capacity determination letter barred the appeal against demand raised under Rule 96ZO(3).

Analysis: The capacity determination letter was treated as not being the appealable order for the controversy actually raised. The demand in question was made under Rule 96ZO(3), which was linked to installed capacity and monthly payment, not to the annual capacity determination under Rule 96ZO(1). Since the demand proceeded under Rule 96ZO(3), the earlier letter did not control the maintainability of the appeal against the demand.

Conclusion: The objection based on non-challenge to the capacity determination letter did not defeat the appeal, and delay was condoned.

Issue (ii): Whether proceedings could continue after omission of Section 3A and Rule 96ZO and in the absence of any saving provision.

Analysis: Once Section 3A of the Central Excise Act, 1944 was omitted without a saving clause, the source of power for the subordinate scheme stood extinguished. The reasoning proceeded on the principle that subordinate legislation cannot survive the disappearance of its parent provision unless expressly saved. The omission of the parent provision therefore rendered pending proceedings under the scheme unsustainable.

Conclusion: The proceedings could not continue and the demand founded on the omitted scheme was unsustainable.

Issue (iii): Whether the provisions for interest and penalty under Rule 96ZO(3) were within the rule-making power under the Central Excise Act, 1944.

Analysis: Interest and penalty were treated as substantive fiscal liabilities that require clear statutory authority. The Act did not confer an express or implied power enabling the delegated rule-making authority to impose such liabilities under the scheme of Section 3A. The impugned provisions were therefore beyond the delegated power and could not be sustained.

Conclusion: The provisions for interest and penalty under Rule 96ZO(3) were ultra vires and unenforceable.

Final Conclusion: The demand and consequential liabilities under the impugned scheme were set aside, and the connected cross-objection became infructuous.

Ratio Decidendi: Subordinate legislation made under a parent provision cannot survive once the parent provision is omitted unless expressly saved, and delegated rules cannot create substantive interest or penalty liabilities without clear statutory authority.

---