Penal interest under central excise law is not leviable where mistaken credit is promptly rectified and no suppression or fraud exists.

Penal interest under Section 11AB of the Central Excise Act was described as inapplicable where credit was taken by mistake, the error was corrected immediately, and the amount was voluntarily paid and disclosed to the authorities. The text states that the levy depended on a duty demand and confirmation under Section 11A, together with wilful suppression, misstatement, or fraud. As the conduct was treated as bona fide rectification and no mala fides were found, the conditions for interest were not met and recovery was not justified.

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Issues: Whether penal interest under Section 11AB of the Central Excise Act, 1944 was demandable from the respondent on the facts of the case.

Analysis: The respondent had inadvertently taken credit in its PLA and, upon detection of the mistake, paid the amount on the same day and informed the authorities. The authorities below had also treated the availment of credit as a mistake and found no mala fides. For the relevant period, interest under Section 11AB was attracted only where duty had been demanded and confirmed under Section 11A and the case involved evasion by wilful suppression, misstatement, or fraud. Since the duty amount had been paid voluntarily and the conduct was found to be a bona fide rectification of mistake, the conditions for levy of penal interest were not satisfied.

Conclusion: Penal interest under Section 11AB of the Central Excise Act, 1944 was not recoverable from the respondent.

Ratio Decidendi: Interest under Section 11AB is not leviable where the duty has been voluntarily paid and the essential conditions of duty demand under Section 11A and wilful suppression, misstatement, or fraud are absent.

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