Retrospective fiscal liability and penalty require clear statutory authority; amended excise interest and penalty were not sustainable for the earlier period.

An amended fiscal provision enhancing liability cannot be applied retrospectively unless the statute clearly so provides. On the stated facts, interest under section 11AB of the Central Excise Act was confined to cases involving fraud, collusion, suppression of facts or wilful misstatement, and those foundational conditions were neither alleged nor found; the earlier period therefore did not attract interest. Penalty likewise could not be sustained because the relevant period did not fall under the invoked rule and no valid penal provision was applied to the facts. The impugned interest demand and penalty were set aside.

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Issues: (i) whether interest under section 11AB of the Central Excise Act, 1944 could be levied for the period prior to the amendment that widened its scope; and (ii) whether penalty was sustainable under Rule 173Q of the Central Excise Rules, 1944 or Rule 25 of the Central Excise (No. 2) Rules, 2001.

Issue (i): whether interest under section 11AB of the Central Excise Act, 1944 could be levied for the period prior to the amendment that widened its scope.

Analysis: The pre-amendment provision permitted levy of interest only where non-payment or short payment of duty was attributable to fraud, collusion, suppression of facts, or wilful misstatement with intent to evade duty. Those foundational conditions were not alleged in the notice or found in adjudication. The later amendment, effective from 11-5-2001, did not indicate retrospective operation, and therefore could not govern the disputed earlier period.

Conclusion: Interest under section 11AB for the period 20-3-2001 to 21-4-2001 was not leviable and the demand was unsustainable.

Issue (ii): whether penalty was sustainable under Rule 173Q of the Central Excise Rules, 1944 or Rule 25 of the Central Excise (No. 2) Rules, 2001.

Analysis: The disputed period fell when Rule 173Q was not in force, and the adjudicating authority did not invoke Rule 25 for sustaining the penalty. The non-payment was also stated to rest on a bona fide claim of exemption, and no valid penal provision was applied to the facts.

Conclusion: The penalty was not sustainable and had to be set aside.

Final Conclusion: The impugned demand of interest and the penalty were both vacated, and the assessee succeeded in the appeal.

Ratio Decidendi: An amended fiscal provision enhancing liability will not apply retrospectively unless the statute clearly so provides, and penalty cannot be sustained without invocation and applicability of a valid penal provision for the relevant period.

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