Excise interest on delayed duty payment remains payable even when duty is paid before notice under the amended scheme.

Under the amended Section 11AB of the Central Excise Act, interest is payable on delayed or short payment of duty even where the assessee pays the duty during investigation before issuance of the show-cause notice. In a clandestine removal matter, the duty had already been confirmed and the dispute concerned only interest liability; Section 11A(2B) did not exempt the assessee from interest for the period of delay. Applying the principle that interest follows deferred payment of duty for whatever reason, and treating SKF India Ltd. as directly applicable, the note states that payment before notice does not defeat interest under the amended provision.

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Issues: Whether interest under Section 11AB of the Central Excise Act, 1944 was payable on duty paid during investigation before issuance of the show-cause notice, in a case of clandestine removal covered by the amended provision.

Analysis: The duty demand had been confirmed for clandestine removal for the relevant period, and the duty was paid by the assessee during investigation before the show-cause notice. The dispute turned only on interest under the amended Section 11AB, which had come into force on 11.05.2001. Under the amended scheme, read with Section 11A(2B), payment of duty before notice does not exempt the assessee from interest for the period of delay. The governing principle applied was that interest is leviable on delayed or deferred payment of duty for whatever reasons, and the Supreme Court decision in SKF India Ltd. was treated as directly applicable.

Conclusion: Interest under Section 11AB was payable, and the order setting aside interest was unsustainable. The appeal was allowed in favour of the Revenue.

Ratio Decidendi: Under the amended Section 11AB, delayed or short payment of excise duty attracts mandatory interest even if the duty is paid before issuance of notice and even absent any intent to evade duty.

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