Compounded levy scheme demands mandatory interest on delayed duty payment, and general limitation does not govern recoveries.

Under the compounded levy scheme, failure to pay monthly duty by the prescribed due date attracts mandatory interest at 18% per annum under Rule 96ZP(3), because the later capacity-determination order only quantifies an already existing statutory liability. The provision makes interest payable from the due date until actual payment and leaves no discretion to waive it. Recoveries under the compounded levy scheme are also treated as distinct from ordinary central excise demands, so the general limitation period under Section 11A does not apply to such proceedings.

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Issues: (i) Whether interest at 18% was chargeable on delayed payment of duty under the compounded levy scheme notwithstanding the contention that liability arose only on final capacity determination; (ii) Whether the show cause notices were barred by limitation under the general time limit where recovery was made under the compounded levy scheme.

Issue (i): Whether interest at 18% was chargeable on delayed payment of duty under the compounded levy scheme notwithstanding the contention that liability arose only on final capacity determination.

Analysis: The duty liability under the compounded levy scheme arose from the statutory obligation to pay monthly duty by the due date, and the later capacity-determination order merely quantified that already existing liability. The fourth proviso to Rule 96ZP(3) expressly required a manufacturer who failed to pay the whole duty by the 10th day of the month to pay the outstanding amount with interest at 18% per annum from the prescribed date till actual payment. The interest was therefore mandatory and not discretionary.

Conclusion: The demand of interest was rightly sustained and the objection of the assessee failed.

Issue (ii): Whether the show cause notices were barred by limitation under the general time limit where recovery was made under the compounded levy scheme.

Analysis: The recovery related to duty payable under the compounded levy scheme, and the statutory scheme was distinct from the general limitation regime under Section 11A. In view of the larger bench ruling relied upon, recoveries under the compounded levy scheme for re-rollers were not governed by the general time limit prescribed under Section 11A of the Central Excise Act. The objection based on limitation therefore could not succeed.

Conclusion: The notices were held to be within time and the limitation challenge failed.

Final Conclusion: The statutory demand of interest and the recovery proceedings under the compounded levy scheme were upheld, leaving no ground for interference.

Ratio Decidendi: Under the compounded levy scheme, failure to pay duty by the prescribed monthly due date attracts mandatory interest under Rule 96ZP(3), and recoveries under that scheme are not governed by the general limitation period applicable to ordinary central excise demands.

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