Interest on Sugar Cess follows excise duty rules when export goods cleared under bond are diverted to home consumption.

Sugar Cess is levied and collected as a duty of excise under the Sugar Cess Act, 1982, so the Central Excise Act, 1944 and the related rules govern its levy and collection. Where goods cleared for export under bond are diverted to home consumption, Notification No. 42/2001-C.E. (N.T.) provides for payment of excise duty and interest. On that basis, interest on Sugar Cess follows the same statutory framework as interest on excise duty and is recoverable when export goods are diverted for local use.

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Issues: Whether interest was payable on Sugar Cess when sugar cleared for export under bond was diverted to home consumption.

Analysis: Sugar Cess is levied and collected as a duty of excise under the Sugar Cess Act, 1982, and the provisions of the Central Excise Act, 1944 and the rules made thereunder apply to its levy and collection. Notification No. 42/2001-C.E. (N.T.) dated 26th June, 2001 specifically provides for payment of excise duty and interest where goods cleared for export are diverted for local use. Since Sugar Cess partakes the character of duty of excise, the liability to pay interest on such cess follows the same statutory framework.

Conclusion: Interest on Sugar Cess was payable and the order setting aside such interest was unsustainable.

Ratio Decidendi: Where a cess is statutorily treated as a duty of excise and the governing notification provides for interest on diversion of export goods to home consumption, interest is recoverable on the cess in the same manner as on excise duty.

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