Interest demand cannot rest on a new ground, and Section 11AB cannot apply retrospectively to past clearances.

Interest demand cannot be sustained on a ground not proposed in the show cause notice or relied on in the original adjudication, and refund denial on such a fresh basis was impermissible. Interest under Section 11AB of the Central Excise Act, 1944 was also held inapplicable to clearances made before that provision came into force, as applying it to 1984-85 to 09.05.1989 clearances would amount to retrospective operation without express legislative intent. The impugned order was set aside and consequential relief followed.

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Issues: (i) whether interest could be demanded and refund denied on a ground not invoked in the show cause notice or the original adjudication order; (ii) whether interest under Section 11AB of the Central Excise Act, 1944 could be levied on clearances made prior to the introduction of that provision.

Issue (i): whether interest could be demanded and refund denied on a ground not invoked in the show cause notice or the original adjudication order.

Analysis: The proceedings throughout were founded on liability under Section 11AA of the Central Excise Act, 1944. The appellate authority introduced Section 11AB as a fresh basis for sustaining the demand, although that provision had neither been proposed in the show cause notice nor formed part of the original order. A demand cannot be sustained on a completely new foundation outside the notice and adjudication framework.

Conclusion: The denial of refund on a new ground was unsustainable and was held to be impermissible.

Issue (ii): whether interest under Section 11AB of the Central Excise Act, 1944 could be levied on clearances made prior to the introduction of that provision.

Analysis: The clearances in dispute were made during 1984-85 to 09.05.1989, much before 28.09.1996. The Board's circular clarified that Section 11AB could be invoked only for clearances made after 28.09.1996. The levy of interest for a period anterior to the insertion of the provision would amount to applying the provision retrospectively in the absence of express legislative intent.

Conclusion: Interest under Section 11AB was held to be inapplicable to the disputed clearances.

Final Conclusion: The impugned order was set aside, and the appeal was allowed with consequential relief.

Ratio Decidendi: A demand of interest cannot be sustained on a ground not proposed in the show cause notice or original adjudication, and an interest provision cannot be applied to past clearances unless the statute expressly gives it retrospective effect.

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