Rule 96ZO(3) penalties need crystallised duty liability; interest and penalty were not leviable after abatement was disallowed.

Under Section 3A of the Central Excise Act and Rule 96ZO(3), interest and penalty were treated as dependent on a failure to pay an admitted monthly duty amount by the due date. Here, the duty liability arose only after the adjudicating authority disallowed abatement for the shutdown period and quantified the amount payable. Because the liability was crystallised only by that adjudication, the precondition for applying the interest and penalty consequences under Rule 96ZO(3) was not met. Interest and penalty were therefore not leviable, and the assessee succeeded.

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Issues: Whether interest and penalty were leviable under Rule 96ZO(3) when the duty liability arose only after disallowance of abatement by the adjudicating authority.

Analysis: The appellants were operating under Section 3A of the Central Excise Act, 1944 and had opted to pay duty monthly under Rule 96ZO(3) of the Central Excise Rules. The duty demand, however, was not the result of a failure to pay an admitted monthly amount by the due date; it was quantified only when the Commissioner, by order dated 28-2-2001, disallowed abatement for the shutdown period and determined the amount payable. Since the liability was crystallised only by that adjudication, the condition precedent for invoking the interest and penalty consequences under Rule 96ZO(3) was not satisfied.

Conclusion: Interest and penalty under Rule 96ZO(3) were not leviable, and the appeal succeeded in favour of the assessee.

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