Court quashes interest on excise duty, deems payment unjustified.

The High Court quashed the Settlement Commission's order directing the petitioner to pay interest on excise duty at 13% per annum. The court found the imposition of interest erroneous and perverse, considering the petitioner's genuine belief in exemption entitlement and the benefits of deemed exports. The court ruled in favor of the petitioner, deeming the interest payment unjustified, and made the rule absolute without awarding any costs.

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Issues involved: Impugned order directing petitioner to pay interest on excise duty amount at 13% p.a.

Facts: Petitioners engaged in manufacturing aluminium conductors availed exemption under Notification No. 108/95-C.E. for goods supplied to projects financed by approved international organizations. Received certificate from APTRANSCO for exemption, but later cancelled. Show cause notice issued for duty recovery. Writ petition filed challenging cancellation. Settlement application filed, payments made, and Settlement Commission admitted application.

Submissions by Petitioners: Claimed clearances to APTRANSCO as deemed exports, bona fide belief in JBIL's status, no suppression of facts, and ineligibility for interest under Section 11AB. Argued no provision for interest under Notification No. 108/95-C.E. or Section 11AA. Relied on Supreme Court decisions for support.

Per Contra: Respondent argued petitioners failed to pay duty post-cancellation of certificate, delayed payments, and filed writ petition challenging cancellation. Claimed revenue entitled to interest on deposited duty until refund application received. Dismissed relevance of Supreme Court decisions cited by petitioners.

Conclusion: Settlement Commission acknowledged petitioners' genuine belief in exemption entitlement, granted immunity from penalty and prosecution, but directed interest payment on duty amount. Petitioners contended interest imposition was erroneous due to deemed export benefits and revenue neutrality. High Court quashed Settlement Commission's order to pay interest on excise duty amount at 13% p.a., deeming it erroneous and perverse. Rule made absolute with no costs awarded.

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