Interest on capital goods cleared after final product exemption was not payable for the intervening period.

Capital goods were acquired when credit was admissible and the finished product was dutiable. The later exemption of the final product did not create any liability to pay interest for the intervening period before the capital goods were cleared, because the exemption notification did not impose such an interest burden on capital goods. The demand for interest was therefore unsustainable.

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Issues: Whether interest was payable for the intervening period after the final product became exempt, when the capital goods were cleared later on payment of duty.

Analysis: The capital goods were procured when the assessee was entitled to take credit and the finished product was dutiable. The subsequent exemption of the final product did not create a liability to pay interest for the period between exemption and clearance of the capital goods, and there was no basis to treat the exemption notification as imposing such interest liability on capital goods.

Conclusion: Interest was not payable for the intervening period and the demand was unsustainable.

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