Interest on redetermined duty runs from first determination; penalty for corrugation as manufacture was upheld but reduced.

Where an appellate remand only requires recomputation of duty without disturbing the original duty determination, interest under Section 11AA runs from the date of first determination and not from the later re-determination. On penalty, corrugation of galvanised sheets was treated as manufacture under settled excise understanding, so liability under Rule 173Q could still arise despite the assessee's challenge to the legal position. The penalty was, however, moderated in view of the limited nature of the dispute and was reduced to a lower amount.

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Issues: (i) whether interest was payable on the redetermined duty from the date of the first adjudication order under Section 11AA; (ii) whether penalty under Rule 173Q was justified for corrugation of galvanised sheets, and if so to what extent.

Issue (i): whether interest was payable on the redetermined duty from the date of the first adjudication order under Section 11AA.

Analysis: The duty demand had not been set aside in the earlier remand order; only the quantum was to be recomputed after giving cum-duty benefit and Modvat credit. Explanation 1 to Section 11AA applies where the duty determined to be payable is reduced by appellate or revisional authority, in which event the relevant date remains the date on which duty was first determined to be payable. On that basis, interest follows the original determination and not the later re-determination order.

Conclusion: Interest was payable from the date of the first determination of duty and the assessee's challenge failed.

Issue (ii): whether penalty under Rule 173Q was justified for corrugation of galvanised sheets, and if so to what extent.

Analysis: The activity of corrugation had consistently been treated as manufacture in the prevailing excise jurisprudence, and the authorities cited by the assessee did not decide the same excise issue against manufacture. The plea that the legal position was unsettled did not displace the finding that duty was evaded on a manufacturing activity. At the same time, the dispute was confined to the quantum and the nature of the controversy warranted some moderation.

Conclusion: Penalty under Rule 173Q was sustainable, but it was reduced from Rs. 1 lakh to Rs. 20,000.

Final Conclusion: The duty-related findings were upheld, interest liability was affirmed on the original date of determination, and only the penalty was scaled down.

Ratio Decidendi: Where an appellate remand merely reduces the quantum of duty without unsettling the original determination, interest under Section 11AA runs from the date of first determination, and penalty may still be imposed when the disputed activity amounts to manufacture under settled excise understanding.

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