Ultra vires interest levy under delegated rule held unenforceable where fixed daily charge exceeded the parent statute.

A delegated rule on interest under the Central Excise framework must remain within the parent statute and compute liability by reference to the duty in default and the period of default. A fixed daily levy of Rs. 1,000, offered as an alternative to interest at 2% per month, was treated as changing the levy from compensatory interest into a penal exaction. The Madras HC held that the rule-making power did not authorise such a charge, so the impugned portion of Rule 8(3) was ultra vires and unenforceable. The invalid part was severable, and the demand to that extent was set aside.

---

---

Issues: Whether the component of Rule 8(3) of the Central Excise Rules providing for interest at Rs. 1,000 per day, as an alternative to interest at 2% per month, was valid and enforceable in light of Section 11AB of the Central Excise Act.

Analysis: The Court followed the view that interest under the parent Act is chargeable only in relation to the amount of duty in default and for the period of default. A fixed daily levy unrelated to the amount outstanding was held to alter the nature of the levy from compensatory interest to a penal exaction. Since the rule-making power under the Act did not authorise such an alternative daily charge, the impugned part of Rule 8(3) was beyond the enabling power and could not stand. The invalid portion was treated as severable from the rest of the rule.

Conclusion: The daily levy of Rs. 1,000 under Rule 8(3) was held invalid and inoperative, and the resulting demand to that extent was set aside.

Ratio Decidendi: A delegated rule imposing interest must remain within the scope of the parent statute and must compute interest on the amount and period of default; a fixed daily levy unrelated to the duty in default is ultra vires and unenforceable.

---