Delayed duty interest and penalty under Central Excise rules were limited by sustained rate and pre-notice payment.

Interest on delayed duty payment under Rule 8(3) of the Central Excise Rules, 2002 is stated to be chargeable only at two per cent per month, being the rate sustained under the governing notification, and the higher daily rate was set aside for fresh quantification. Penalty under Rule 25 is treated as unavailable where the entire duty had been paid before issuance of the show-cause notice, applying the settled no-penalty principle from the earlier equivalent provision. The net effect recorded is deletion of the penalty and recalculation of interest in accordance with the sustained legal position.

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Issues: (i) Whether interest on delayed payment of duty under Rule 8(3) of the Central Excise Rules, 2002 could be demanded at the rate of Rs. 1,000 per day or only at the rate of two per cent per month as sustained by the High Court. (ii) Whether penalty under Rule 25 of the Central Excise Rules, 2002 was leviable when the entire duty had been paid before issuance of the show-cause notice.

Issue (i): Whether interest on delayed payment of duty under Rule 8(3) of the Central Excise Rules, 2002 could be demanded at the rate of Rs. 1,000 per day or only at the rate of two per cent per month as sustained by the High Court.

Analysis: Rule 8(3), as sustained after the High Court's decision, permits levy of interest only at two per cent per month, equivalent to twenty-four per cent per annum, as notified by the Central Government in terms of Section 11AB of the Central Excise Act, 1944. The higher daily rate could not survive in view of the judicial invalidation referred to in the order.

Conclusion: The demand of interest at Rs. 1,000 per day was set aside and the matter was directed to be re-quantified in accordance with Rule 8(3) as sustained by the High Court.

Issue (ii): Whether penalty under Rule 25 of the Central Excise Rules, 2002 was leviable when the entire duty had been paid before issuance of the show-cause notice.

Analysis: Rule 25 is treated as equivalent to the erstwhile Rule 173Q of the Central Excise Rules, 1944. The settled position applied in the order is that where the entire duty is paid before issuance of the show-cause notice, no penalty is imposable under the equivalent penalty provision.

Conclusion: The penalty imposed under Rule 25 was set aside.

Final Conclusion: The appeal succeeded to the extent of deletion of the penalty and substitution of the interest demand with a fresh quantification in accordance with the sustained legal position.

Ratio Decidendi: Where a penalty provision is materially equivalent to an earlier provision, the same no-penalty principle applies when the duty is fully paid before issuance of the show-cause notice, and interest on delayed duty payment must conform to the rate validly sustained under the governing rule and notification.

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