Mandatory interest on delayed duty payments under the compounded levy regime can be recovered without a separate show-cause notice.

Statutory interest under Rule 96ZO(3) of the Central Excise Rules, 1944 was held to arise concurrently with the duty default in the compounded levy regime. Because the provision was mandatory, recovery of interest could not be defeated merely by the absence of a separate show-cause notice. The challenge based on limitation was also rejected, as the time-bar objection was not made out on the facts. Recovery of interest was therefore sustained in favour of Revenue.

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Issues: Whether interest payable for default in payment of duty under Rule 96ZO(3) of the Central Excise Rules, 1944 could be recovered without a show-cause notice and whether the demand was barred by limitation.

Analysis: The liability to pay interest under the proviso to sub-rule (3) of Rule 96ZO runs concurrently with the duty liability and arises on default in payment. The provision is mandatory in character. In such a case, the absence of a separate show-cause notice does not defeat recovery of interest. The reliance placed on a decision under the Customs Act was held inapposite, since the present rule specifically governed recovery of interest under the compounded levy regime and the issue of time-bar did not arise on the facts.

Conclusion: The demand of interest was recoverable, and the objection based on limitation was rejected in favour of Revenue.

Ratio Decidendi: Where a statutory rule mandatorily provides for interest on delayed payment of duty, the liability arises concurrently with the duty default and recovery cannot be defeated merely for want of a separate show-cause notice or on a plea of limitation.

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