Mandatory interest and penalty for delayed excise duty payment cannot be avoided by paying before show cause notice

Delayed payment of excise duty attracted mandatory interest and penalty under Rule 96ZO and Rule 96ZQ, because the relevant rules imposed those consequences as statutory liabilities. Payment of the duty before issuance of the show cause notice did not, by itself, extinguish or waive the duty-related interest and penalty. The contrary view that prior payment justified deletion of penalty was treated as unsustainable in light of the governing Supreme Court position, and the earlier Tribunal view was no longer good law. The departmental challenge succeeded, and the adjudication restoring interest and penalty was upheld.

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Issues: Whether delay in payment of excise duty attracted mandatory interest and penalty under Rule 96ZO and Rule 96ZQ of the Central Excise Rules, 1944, and whether payment of duty before issuance of the show cause notice justified deletion of the penalty and interest.

Analysis: The liability to pay interest on delayed duty payment and the obligation to impose penalty were treated as mandatory under the relevant rules. The order under challenge had relied on the fact that the duty was paid before the show cause notice and on a Tribunal view that such payment could justify deletion of penalty. That approach was held untenable in view of the clear legal position and the governing Supreme Court ruling, and the earlier Tribunal view was treated as no longer good law.

Conclusion: Payment of the duty before issuance of the show cause notice did not waive the statutory liability to interest and penalty, and the order setting aside those demands was unsustainable.

Final Conclusion: The departmental challenge succeeded, and the original adjudication restoring interest and penalty was upheld.

Ratio Decidendi: Where the relevant excise rules make interest and penalty mandatory for delayed payment of duty, prior payment of the duty before issuance of the show cause notice does not by itself exempt the assessee from such statutory consequences.

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