Prospective application of excise interest and penalty provisions limits retrospective demands for pre-commencement removals.

A CESTAT note addresses excise liability arising from alleged shortage and removal of raw materials without invoices, and confirms that the factual finding of removal was sustained where stock verification and month-wise removals supported the department's case. It also records that interest could not be demanded under Rule 57-I(4) for a period before that rule commenced, as fiscal interest provisions do not operate retrospectively. On penalty, it states that Section 11AC applied prospectively and could not cover removals completed before its commencement, though some penal consequence remained and the penalty was reduced.

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Issues: (i) Whether the finding of shortage and removal of raw materials without excise invoices warranted interference. (ii) Whether interest could be demanded under Rule 57-I(4) for a period prior to the rule's commencement. (iii) Whether penalty under Section 11AC was attracted, and if so, to what extent.

Issue (i): Whether the finding of shortage and removal of raw materials without excise invoices warranted interference.

Analysis: The shortage was supported by the stock verification and the show cause notice set out month-wise removals attributed to the appellant. The certificate relied upon for alleged evaporation and losses had already been considered and rejected with reasons by the Commissioner (Appeals), and the appellant did not effectively dislodge the factual basis of removal.

Conclusion: The finding on shortage and removal was sustained and interference was declined.

Issue (ii): Whether interest could be demanded under Rule 57-I(4) for a period prior to the rule's commencement.

Analysis: Rule 57-I(4) came into effect only from 23-7-1996, whereas the demand related to the period ending in March 1996. A provision for interest cannot be applied to a period anterior to its commencement.

Conclusion: The interest demand was not sustainable.

Issue (iii): Whether penalty under Section 11AC was attracted, and if so, to what extent.

Analysis: Section 11AC was held to operate prospectively. Since the relevant removal occurred before the provision became effective, penalty under that section could not be imposed. At the same time, the case involved admitted removal of duty-paid inputs on which credit had been taken to another unit without payment of appropriate duty, justifying some penal consequence.

Conclusion: Penalty under Section 11AC was not attracted, but the penalty was reduced to Rs. 30,000.

Final Conclusion: The appeal succeeded only to the limited extent of setting aside the interest demand and holding Section 11AC inapplicable, while the factual finding of removal remained undisturbed and the penalty stood reduced.

Ratio Decidendi: A fiscal provision creating interest or penalty cannot be applied retrospectively unless the statute clearly so provides, and a prospective penal provision under Section 11AC cannot govern removals completed before its commencement.

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