Invalidity of fiscal demand: interest and penalty fall when the underlying excise rules are struck down.

Once the statutory rules forming the sole basis of a fiscal demand were struck down, consequential claims for interest and penalty under Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 could not be sustained. The Calcutta HC accordingly treated the interest and penalty demand as invalid. The duty component was not finally determined in the writ proceeding, because the petitioners had already pursued an appeal and were left to seek the available remedy before the appropriate forum in accordance with law.

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Issues: Whether the imposition of interest and penalty under Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 could be sustained after those rules were struck down, and whether the duty dispute required adjudication in the writ proceeding.

Analysis: The claim for interest and penalty was founded on Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944. In view of the striking down of those rules, the basis for levying interest and penalty ceased to survive. As regards the duty component, the petitioners had already availed an appeal and were left at liberty to pursue the remedy available in accordance with law before the appropriate forum.

Conclusion: The demand of interest and penalty was held unsustainable, while the dispute on duty was left to be worked out in accordance with law before the competent forum.

Final Conclusion: The petition succeeded to the extent of invalidating the interest and penalty demand, but no final writ determination was made on the duty liability.

Ratio Decidendi: Once the statutory rules forming the sole basis of a fiscal demand are struck down, consequential claims for interest and penalty under those rules cannot be sustained.

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