Revenue-neutral excise clearances bar pre-11.05.2001 interest under unamended Section 11AB absent fraud or suppression.

In a revenue-neutral excise situation where duty-paid inputs were cleared to sister concerns and the recipient units could avail credit, non-payment of duty was not attributable to fraud, collusion, or wilful misstatement. On that basis, unamended Section 11AB of the Central Excise Act could not support levy of interest for clearances made before 11.05.2001. The ruling distinguished the post-amendment position and stated that, for pre-11.05.2001 clearances, interest would arise only from 11.05.2001 if payment was made later, while for clearances on or after 11.05.2001 interest would run from the date duty became payable.

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Issues: Whether interest under unamended Section 11AB of the Central Excise Act, 1944 could be levied for clearances made before 11.05.2001 in a revenue-neutral situation where duty-paid inputs were cleared to sister concerns and credit was available to the recipient units.

Analysis: The demand had been confirmed under the extended period, but the earlier appellate order had also allowed credit of the duty to the recipient sister concerns and had reduced the penalties, treating the clearances as contraventions of rules rather than deliberate evasion. On those facts, the matter was held to be revenue neutral. The Court held that in a revenue-neutral case, non-payment of duty could not be attributed to fraud, collusion, or wilful misstatement so as to attract unamended Section 11AB for the period prior to 11.05.2001. The Larger Bench reference was treated as inapplicable because it dealt with the post-amendment scope of Section 11AB in cases involving fraud or suppression, not with a revenue-neutral case.

Conclusion: Interest under unamended Section 11AB could not be demanded for clearances made before 11.05.2001 in the facts of the case; for such clearances, interest would arise only from 11.05.2001 if payment was made thereafter, and for clearances on or after 11.05.2001 interest would run from the date duty became payable.

Ratio Decidendi: In a revenue-neutral case, where duty-paid credit is available to the recipient and no fraud, collusion, or wilful misstatement is established, unamended Section 11AB does not permit levy of interest for the pre-11.05.2001 period.

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