Interest on provisional assessment arises only when the governing rule expressly creates liability; prior-period demand rejected.

Interest on amounts arising from finalisation of provisional assessment can be levied only from the date the governing rule expressly creates that liability. Rule 7(4) of the Central Excise Rules, 2001 was treated as materially analogous to the 2002 rule and was read as authorising interest from 1-7-2001, when the 2001 Rules came into force. Section 37 of the Central Excise Act, 1944 was treated as only an enabling provision and not, by itself, a basis to charge interest for the earlier period. Accordingly, the demand for interest prior to 1-7-2001 was unsustainable.

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Issues: Whether interest on amounts arising out of finalisation of provisional assessment was chargeable for the entire period from 1-1-2000 to 31-12-2003, or only from the date on which the applicable rule expressly providing for such interest came into force.

Analysis: Rule 7(4) of the Central Excise Rules, 2001 was held to be materially analogous to Rule 7(4) of the Central Excise Rules, 2002, and it expressly provided for payment of interest from the first day of the month succeeding the month for which the amount was determined. On that basis, interest was held payable from 1-7-2001, the date from which the 2001 Rules became effective. The contention that Section 37 of the Central Excise Act, 1944 by itself authorised interest for the entire earlier period was rejected, since it was treated only as an enabling provision and not as a basis for charging interest in the absence of an operative rule. The earlier portion of the demand prior to 1-7-2001 was therefore unsustainable.

Conclusion: Interest was payable only from 1-7-2001 to 31-12-2003 and not for the period prior to 1-7-2001, so the assessee succeeded in part.

Ratio Decidendi: Interest on provisional assessment can be levied only from the date when the governing rule expressly creates the liability, and an enabling statutory power alone does not authorise recovery for a prior period absent an operative rule.

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