Enhanced delayed-payment interest under Rule 8 held unsustainable; demand confined to permissible statutory interest.

Interest for delayed payment of duty under Rule 8 of the Central Excise Rules, 2002 could not be demanded at the enhanced rate of Rs.1,000 per day, because the Tribunal followed the High Court view that the enhanced interest expression in Rule 8(3) was invalid. On that basis, the demand for enhanced daily interest was held unsustainable, and the Commissioner (Appeals)' order setting aside the adjudication on demand and penalty was upheld. The liability was therefore confined to the permissible statutory interest already paid under Section 11AB of the Central Excise Act, 1944.

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Issues: Whether interest could be demanded at the enhanced rate of Rs.1,000 per day for delayed payment under Rule 8 of the Central Excise Rules, 2002, and whether the Commissioner (Appeals) was justified in setting aside the demand and penalty.

Analysis: The demand arose from delayed payment of duty under Rule 8, after which the respondent paid the duty with interest under Section 11AB of the Central Excise Act, 1944. The Tribunal relied on the High Court view that the expression in Rule 8(3) providing for interest at Rs.1,000 per day or 2% per month, whichever is higher, was invalid. On that basis, the enhanced daily interest demand was held unsustainable, and the appellate order setting aside the adjudication was found free from infirmity.

Conclusion: The demand for interest at Rs.1,000 per day was not sustainable, and the order of the Commissioner (Appeals) was upheld in favour of the respondent.

Ratio Decidendi: Where the enhanced rate of delayed-payment interest under Rule 8(3) is invalidated, the demand cannot be sustained at that enhanced rate and must be confined to the permissible statutory interest.

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