Compensatory interest on delayed excise duty upheld under Section 11AA where default in payment was admitted and proved.

Interest was leviable on delayed payment of central excise duty because default in payment by the due date was admitted and established from the record. Section 11AA of the Central Excise Act, 1944 was applied on the basis that interest is compensatory and accrues from the date of default until actual payment, reflecting delayed restoration of public revenue. The show cause notice issued on that footing was sustained, and the challenge to the demand failed.

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Issues: Whether interest was leviable on the delayed payment of central excise duty under Section 11AA of the Central Excise Act, 1944.

Analysis: There was an admitted default in payment of duty by the due date, and the delay was established from the record. Interest is compensatory in nature and follows the delayed restoration of public revenue. Section 11AA of the Central Excise Act, 1944 embodies this principle by providing for interest on unpaid duty from the date of default till payment. The issuance of the show cause notice on that basis was therefore sustained.

Conclusion: Interest was rightly demanded on the delayed duty payment under Section 11AA of the Central Excise Act, 1944, and the assessee's challenge failed.

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