Compensatory interest on delayed excise duty may be recovered without fresh notice where liability is already crystallised.

Interest on delayed payment of excise duty was treated as compensatory restitution where the duty liability had already crystallised after prolonged litigation and the assessee had retained the benefit of interim protection. On those admitted facts, the absence of a fresh show cause notice did not invalidate the demand because no further adjudication of liability was required before recovering interest. The later insertion of section 11AA of the Central Excise Act, 1944 did not defeat the claim, and the demand was not held time barred on the facts because the record showed continuing recovery efforts and persistent delay. The demand for interest was therefore sustained.

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Issues: (i) Whether the demand of interest on delayed payment of excise duty could be quashed for want of prior show cause notice and hearing. (ii) Whether the demand of interest was untenable because section 11AA of the Central Excise Act, 1944 was inserted later and the demand was stale or time barred.

Issue (i): Whether the demand of interest on delayed payment of excise duty could be quashed for want of prior show cause notice and hearing.

Analysis: The liability to pay duty had already been crystallised through prolonged litigation, and the assessee had enjoyed the benefit of interim protection while the Revenue was kept out of its dues. On those admitted facts, no further adjudication of liability was necessary before demanding compensatory interest. The Court held that principles of natural justice were not attracted in the same manner as in a contested assessment or enhanced demand, because the demand flowed from undisputed delay in payment of an already determined public dues liability.

Conclusion: The absence of a prior show cause notice did not invalidate the demand, and the challenge failed on this issue.

Issue (ii): Whether the demand of interest was untenable because section 11AA of the Central Excise Act, 1944 was inserted later and the demand was stale or time barred.

Analysis: The Court held that interest in such circumstances was compensatory and equitable, arising from the wrongful retention of public money and the need for restitution. It further held that the demand was not time barred on the facts, because the correspondence and recovery steps showed continuing efforts by the Revenue and persistent delay by the assessee. The later statutory reference to section 11AA did not defeat the claim, as the demand was upheld on the basis of the admitted facts and the equitable power to compensate deprivation of money.

Conclusion: The demand was valid, not barred by delay, and the statutory challenge failed.

Final Conclusion: The writ petition was rejected, and the demand for interest on the delayed payment of excise duty was sustained in view of the undisputed facts, prolonged litigation, and the compensatory nature of the levy.

Ratio Decidendi: Where public dues are admittedly withheld after litigation and interim protection, interest may be recovered as compensatory restitution even without a fresh adjudicatory notice, provided the demand is made within a reasonable period on the basis of admitted facts.

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