Retrospective interest and penalty under Central Excise law were rejected where differential duty was voluntarily paid after value finalisation.

Interest under Section 11AA of the Central Excise Act was held not to apply retrospectively, so it could not be levied for a period before its introduction on 28-5-1995. Where the assessee had initially cleared goods on cost of production, later finalised the assessable value, and voluntarily paid the differential duty, the conduct was treated as bona fide. On that footing, penalty under Section 11AC was also held unsustainable because the facts did not justify penal consequences.

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Issues: Whether interest under Section 11AA of the Central Excise Act, 1944 and penalty under Section 11AC of the Central Excise Act, 1944 were sustainable where the assessee paid the differential duty on its own after finalising the assessable value.

Analysis: Section 11AA was introduced with effect from 28-5-1995 and was held not to operate retrospectively. The assessee had cleared goods on the basis of cost of production, later recalculated the value on finalisation, and voluntarily paid the differential duty. In these circumstances, the case was treated as bona fide and not warranting penal consequences.

Conclusion: Interest under Section 11AA and penalty under Section 11AC were not sustainable.

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