Retrospective excise duty liability: interest under Section 11AB runs only when duty first becomes legally payable.

Interest under Section 11AB on differential excise duty was held to run only from the date the duty first became legally payable, where the liability arose solely because of a retrospective amendment deeming the process to be manufacture. The text distinguishes such statutory liability from ordinary commercial cases involving supplementary invoices or price revisions, which were treated as inapplicable to a levy created by retrospective legislation. On that reasoning, interest was not payable from the original clearance date; it arose only from the first day of the month succeeding the retrospective amendment's effective date.

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Issues: Whether interest under Section 11AB on differential excise duty became payable from the date of clearance of the goods or only from the date on which the retrospective deeming provision making the process amount to manufacture was introduced.

Analysis: Section 11AB fastens interest from the first day of the month succeeding the month in which the duty ought to have been paid. The differential duty in this case arose only after Chapter Note 5 to Chapter 15 was inserted retrospectively by Section 87 of the Finance Act, 2005. Until that retrospective amendment, the appellant could not be said to have been liable to pay the differential duty on the relevant clearances. The principle in cases involving supplementary invoices and price revisions in ordinary commercial transactions was held inapplicable to a liability created by retrospective legislation.

Conclusion: Interest was not payable from the date of clearance. It became payable only from the first day of the month succeeding the date on which the retrospective amendment came into force, and the appellant succeeded on the issue.

Final Conclusion: The appeal was allowed, and the demand of interest from 1 April 2003 was set aside in view of the retrospective nature of the levy.

Ratio Decidendi: Where the duty liability itself arises only by virtue of a retrospective amendment, interest under Section 11AB runs only from the date the duty first becomes legally payable, not from the original date of removal of the goods.

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