Retrospective interest and unsupported penalty under central excise provisions were both struck down for want of statutory basis.

Interest under Section 11AB of the Central Excise Act could not be demanded for a period before the provision came into force, because a statutory interest levy cannot operate retrospectively; the demand was set aside. Penalty under Rule 173Q of the Central Excise Rules was also unsustainable because the order did not record confiscation of goods or identify the specific contravened clause, leaving no proper statutory for penalty; the penalty was set aside. The assessee therefore obtained complete relief.

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Issues: (i) whether interest could be demanded under Section 11AB of the Central Excise Act, 1944 for a period prior to its introduction; (ii) whether penalty could be imposed under Rule 173Q of the Central Excise Rules, 1944 when the impugned order did not hold the goods liable to confiscation or specify the contravened clause.

Issue (i): Whether interest could be demanded under Section 11AB of the Central Excise Act, 1944 for a period prior to its introduction.

Analysis: Section 11AB came into force with effect from 28-09-1996, while the period in dispute preceded that date. Since the levy of interest is a statutory charge, it cannot be imposed for a period when the provision was not in force.

Conclusion: Interest under Section 11AB was not recoverable for the relevant period and the demand was set aside.

Issue (ii): Whether penalty could be imposed under Rule 173Q of the Central Excise Rules, 1944 when the impugned order did not hold the goods liable to confiscation or specify the contravened clause.

Analysis: Rule 173Q contemplates confiscation of goods for specified contraventions and then imposition of penalty. The impugned order neither recorded confiscation of goods nor identified the particular clause of Rule 173Q allegedly violated. In the absence of such foundational findings, penalty could not be sustained.

Conclusion: Penalty under Rule 173Q was not imposable and was set aside.

Final Conclusion: The demand of interest and the penalty were both annulled, resulting in complete relief to the assessee.

Ratio Decidendi: A fiscal levy of interest or penalty can be sustained only when the charging provision is in force for the relevant period and the adjudicating order records the specific statutory basis for the penalty.

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