Differential excise duty interest applies for delayed payment, but mandatory penalty fails without suppression or fraud.

Interest on differential central excise duty was held payable for the delay period from 11-5-2001 to 8-8-2001, because post-11-5-2001 short levy attracts interest under the amended interest provision even where the assessee later pays the duty on its own ascertainment. Penalty was not leviable, as the department was already aware of the transaction and the record did not establish suppression, collusion, wilful misstatement, fraud, or intent to evade duty. The mandatory penalty under the excise penalty provision was therefore set aside, leaving only interest for the delayed payment period.

---

---

Issues: (i) whether interest on the differential central excise duty was payable for the period after 11-5-2001 until the assessee discharged the duty on 8-8-2001; (ii) whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable when the department was aware of the transaction and no suppression could be alleged.

Issue (i): whether interest on the differential central excise duty was payable for the period after 11-5-2001 until the assessee discharged the duty on 8-8-2001.

Analysis: The duty differential arose after the Government converted the earlier levy-sugar supply into free-sale sugar, but the assessee discharged the differential duty only on 8-8-2001. The department had knowledge of the transaction, so suppression was not established; however, with effect from 11-5-2001, interest under Section 11AB became payable in cases of short levy or short payment even where the differential duty was paid by the assessee on its own ascertainment. For the period from 11-5-2001 to 8-8-2001, interest was therefore attracted.

Conclusion: Interest under Section 11AB was payable for the period from 11-5-2001 to 8-8-2001. The assessee was not in issue-wise favour on this point.

Issue (ii): whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable when the department was aware of the transaction and no suppression could be alleged.

Analysis: The relevant Government orders had been communicated to the department, and the record did not support an allegation of suppression, collusion, wilful misstatement, fraud, or intent to evade duty. In the absence of the conditions that would justify mandatory penalty, the lower appellate authority was correct in setting aside the penalty under Section 11AC and sustaining only a token penalty.

Conclusion: Penalty under Section 11AC was not leviable. This issue was decided in favour of the assessee.

Final Conclusion: The department succeeded only to the limited extent of interest for the post-11-5-2001 period, while the deletion of mandatory penalty was sustained.

Ratio Decidendi: Where short levy is paid after 11-5-2001, interest under Section 11AB is attracted for the period of delay, but mandatory penalty under Section 11AC cannot be imposed without proof of suppression or the other specified culpable ingredients.

---