Compound levy scheme limits penalty and interest unless expressly authorised by the governing statute or rule.

Under the compound levy framework, penalty or interest cannot be imposed unless the governing statute or rule contains an express substantive authorisation. Applying that principle to Rule 96ZO(3) of the Central Excise Rules, 1944, the Tribunal held that the third proviso did not permit a penalty equivalent to duty and could not be used to levy interest on the outstanding duty amount. The self-contained nature of the Section 3A scheme prevented enlargement of liability by general provisions or by reading in powers not expressly provided. The Revenue's demand for penalty failed, and the assessee succeeded on the challenge to interest.

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Issues: (i) whether penalty equivalent to duty could be imposed under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944; (ii) whether interest could be levied on the outstanding duty amount under the same proviso.

Issue (i): Whether penalty equivalent to duty could be imposed under the third proviso to Rule 96ZO(3) of the Central Excise Rules, 1944.

Analysis: The appeal turned on the effect of the compound levy scheme and the scope of Rule 96ZO(3). The governing principle applied was that interest and penal consequences can be imposed only when the statute or the governing scheme contains an express substantive provision authorising them. The Tribunal followed the binding decision that the scheme under Section 3A and the related rules forms a self-contained code, and general provisions cannot be invoked to enlarge the liability beyond what the rule itself permits.

Conclusion: The Revenue's request for imposition of penalty failed.

Issue (ii): Whether interest could be levied on the outstanding duty amount under the same proviso.

Analysis: Applying the same settled principle, the Tribunal held that the rule could not sustain a levy of interest in the absence of an express substantive charging provision. The earlier authoritative pronouncement relied upon by the Tribunal had already declared that the compound levy framework does not itself authorise levy of interest, and the rule-making provision could not be used to supply that omission.

Conclusion: The assessee succeeded on the challenge to the levy of interest.

Final Conclusion: The Revenue's appeal failed, while the assessee's appeal succeeded on the interest issue, resulting in a partial allowance of the assessee's challenge and rejection of the Revenue's demand for penalty and interest.

Ratio Decidendi: In a self-contained compound levy scheme, penalty or interest cannot be imposed unless the governing statute or rule contains an express substantive provision authorising such levy.

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