Interest on delayed duty payment disallowed where manufacturing liability was uncertain until Finance Bill, 2005 clarification.

Interest on belatedly paid duty was held not leviable where the duty itself was undisputed but the assessee could not ascertain the tax liability with certainty during the intervening period before the Finance Bill, 2005 clarified that refining of edible vegetable oil amounted to manufacture. The determining factor was the legal uncertainty surrounding the chargeability for the relevant clearances, and that uncertainty negatived the basis for charging interest for delayed payment. The duty demand remained intact, but interest was disallowed on the interest issue.

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Issues: Whether interest was leviable on the duty paid belatedly for the clearances made during the period of uncertainty before the Finance Bill, 2005 brought refining of edible vegetable oil within the scope of manufacture.

Analysis: The duty demand itself was not in dispute. The liability turned only on whether interest could be charged for the intervening period when the assessee was not in a position to determine the tax liability with certainty. The relevant amendment in Chapter 15 specifically treated the refining process as manufacture, but the position was clarified only by the Finance Bill, 2005. In these circumstances, the assessee's inability to ascertain liability for the relevant period negatived any basis for charging interest.

Conclusion: Interest was not payable, and the assessee succeeded on the interest issue.

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