Bona fide valuation doubt defeats excise penalty, but interest on short-paid duty remains a statutory liability.

Penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002 was held not leviable because the assessee had a bona fide doubt on valuation of goods cleared from depot and consignment agent premises, and no suppression or culpable intent was established. Interest on delayed payment of differential duty was sustained as a statutory consequence of short payment on the date of clearance, and later payment of the differential duty did not wipe out the accrued interest liability. The assessee therefore succeeded only on the penalty issue, while the interest demand remained enforceable.

---

---

Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002 was leviable in the facts of the case; (ii) Whether the demand of interest on the delayed payment of differential duty could be set aside.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002 was leviable in the facts of the case.

Analysis: The differential duty liability was not in dispute and had already been discharged. The Tribunal found that the assessee had a bona fide doubt regarding valuation of goods cleared from the depot and consignment agent premises. In those circumstances, the element of suppression or culpable intent necessary for sustaining penalty was absent.

Conclusion: Penalty was not leviable and was set aside.

Issue (ii): Whether the demand of interest on the delayed payment of differential duty could be set aside.

Analysis: Interest was treated as a statutory consequence of short payment of duty on the date of clearance. Since the duty payable on the relevant date was less than what was ultimately paid, the later payment of differential duty did not extinguish the accrued interest liability.

Conclusion: The demand of interest was upheld and could not be refunded.

Final Conclusion: The assessee succeeded only on the penalty issue, while the interest liability was sustained.

Ratio Decidendi: Where duty has been short-paid on clearance, interest follows as a statutory liability even if differential duty is paid later, but penalty is not justified when the assessee acts under a bona fide doubt and no culpable conduct is established.

---