Retrospective withdrawal of excise exemption can trigger interest on refunded duty, and an interim stay does not erase statutory liability.

Retrospective withdrawal of an excise exemption was treated as if the exemption had never existed, so refunded duty became recoverable with interest and other statutory charges. The liability continued where the statute expressly covered amounts that would have been collected but for the exemption, and interest applied once the recoverable sum remained unpaid beyond the prescribed period. An interim stay did not extinguish that statutory liability, because interim protection is only provisional and restitution requires the parties to be restored to the position they would have occupied absent the stay. The demand for interest on the refunded duty was therefore upheld.

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Issues: Whether interest was payable on excise duty refunds that had been granted under an exemption notification but later became recoverable on retrospective withdrawal of the exemption under Section 154 of the Finance Act, 2003, and whether the interim stay earlier obtained by the assessee extinguished that liability.

Analysis: The retrospective amendment under Section 154 of the Finance Act, 2003 was held to operate as if the exemption had never existed, so the amount refunded had to be restored to the revenue position it would have occupied absent the exemption. The liability under sub-section (4) covered duty, interest, and other charges that would have been collected but for the exemption, and the post-assent interest provision applied where the recoverable amount remained unpaid after the stipulated period. The earlier stay order did not confer a substantive immunity from the statutory liability, because an interim order is only in aid of the final adjudication and the doctrine of restitution requires the successful party to be restored to the position it would have occupied but for the interim protection.

Conclusion: The assessee was liable to pay interest on the refunded excise duty, and the stay order did not wipe out that liability. The challenge to the demand notice failed.

Ratio Decidendi: Where a statutory exemption is retrospectively withdrawn and the statute expressly provides for recovery of refunded amounts together with interest, the beneficiary of an interim stay cannot avoid the consequential liability, because restitution requires restoration of the revenue to the position it would have occupied but for the interim order.

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