Substantial compliance in transitional credit records defeats interest demand where duty was paid in substance and lapse was only procedural.

Substantial compliance with transitional credit requirements, where the assessee filed the declaration, accounted for stock and production, and later regularised the register entries, was treated as sufficient. The omission to first make the prescribed credit and debit entries was held to be a bona fide procedural lapse, not a default in payment of duty. As interest is attracted for non-payment of duty and not for mere irregular maintenance of accounts where the duty liability has been discharged in substance, the demand for interest was held unsustainable and the assessee's appeal succeeded.

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Issues: Whether the assessee, having substantially complied with the transitional credit requirements but having omitted to make the prescribed credit and debit entries in the register, was liable to pay interest for delayed regularisation of the entries.

Analysis: The assessee had filed the required declaration, accounted for the stock and production, and produced the working sheet with the return. The only lapse was failure to first take credit and then debit the amount in the prescribed register, and the omission was later regularised by making the entries. The Tribunal held that the duty liability on the clearances had been discharged in substance and that the lapse was bona fide and procedural, not a default in payment of duty. Interest is meant for assessees who default in payment of duty, and not for a case of mere irregular maintenance of accounts where substantive compliance exists.

Conclusion: The demand of interest was not sustainable and the appeal was allowed in favour of the assessee.

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