Deemed credit and excess duty payment barred interest and penalty absent mens rea.

Where allowable deemed credit exceeded the duty liability and the record showed excess duty payment, no interest was payable on the alleged shortfall. The penalty was also unsustainable because the record did not establish mens rea or mala fides. On that basis, the demand for interest and penalty could not be maintained, and relief followed for the assessee.

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Issues: Whether, on the facts of the case, the demand of interest and imposition of penalty on the assessee were sustainable.

Analysis: The appellant had been entitled to deemed credit that exceeded the duty liability for the relevant period, and the calculations on record showed that excess duty had in fact been paid. In these circumstances, no interest was payable. The record also did not establish any mens rea or mala fides on the part of the appellant; once deemed credit was allowed and excess duty payment was shown, penal consequences could not be sustained.

Conclusion: The demand of interest and penalty was unsustainable and the assessee was entitled to relief.

Ratio Decidendi: Where the duty liability is offset by allowable deemed credit and the assessee has paid excess duty, interest and penalty cannot be sustained in the absence of mens rea.

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