Interest on differential duty applies to short payment, but penalty may be waived and provisional assessment interest depends on unpaid balance.

Differential duty arising from upward price revision through supplementary invoices is treated as short payment of duty, so interest is payable on the delayed amount; however, penalty may be waived where the legal position was previously unsettled and there was no intent to evade. For provisional assessments, interest is recoverable only if a differential duty amount remains unpaid after final determination. Where the assessee had already paid the differential duty before finalisation, no further interest was payable and the challenge failed on that issue.

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Issues: (i) whether interest was payable on differential duty paid on escalation of price through supplementary invoices and whether penalty could be sustained; (ii) whether interest was payable on differential duty arising on finalisation of provisional assessment where the duty had already been paid before finalisation.

Issue (i): Whether interest was payable on differential duty paid on escalation of price through supplementary invoices and whether penalty could be sustained.

Analysis: Differential duty arising from upward revision of price and paid through supplementary invoices falls within the scope of short payment of duty. The legal position on liability to interest stood settled by the Supreme Court in relation to such short-payment situations, and the levy of interest follows even where the payment is made subsequently. At the same time, in the presence of conflicting decisions prior to settlement of the law, absence of intent to evade justified relief from penalty.

Conclusion: Interest was payable on the differential duty, but the penalty was not sustainable and was waived.

Issue (ii): Whether interest was payable on differential duty arising on finalisation of provisional assessment where the duty had already been paid before finalisation.

Analysis: Interest under the rule governing provisional assessment applies only where, on final determination, any differential duty remains payable and is not paid from the relevant date till the date of payment. Where the assessee had already discharged the differential duty on its own calculation before finalisation, no further amount remained outstanding on the date of final assessment. The issue was also covered by prior binding precedent followed by the Tribunal in the assessee's own case.

Conclusion: Interest was not payable and the Revenue's challenge failed on this issue.

Final Conclusion: The appeal concerning supplementary-invoice differential duty succeeded only to the extent of interest, while the penalty was set aside, and the appeal concerning provisional-assessment differential duty was rejected.

Ratio Decidendi: Differential duty paid later on upward price revision attracts interest as short payment of duty, but penalty may be waived where the issue was unsettled; in provisional assessment cases, interest is recoverable only when a differential amount remains unpaid after final determination.

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