Interest on excise duty turns on the operative date of duty determination under Section 11AA in remand and de novo proceedings.

Interest under Section 11AA of the Central Excise Act becomes payable if duty determined under Section 11A is not paid within three months of determination, and the relevant date depends on whether the original demand was merely maintained or was replaced in remand. Where the appellate order only upheld the original demand, the original adjudication date remained the date of determination, so interest was sustained on the duty demand of Rs. 4,12,050/-. Where the original order had been set aside and the matter decided again in de novo adjudication, the de novo order became the operative determination, so interest was not payable on the duty demand of Rs. 6,20,103/-.

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Issues: Whether interest under Section 11AA of the Central Excise Act, 1944 was payable on the duty of Rs. 4,12,050/- and Rs. 6,20,103/-, and how the date of determination of duty was to be reckoned for the purpose of interest.

Analysis: Section 11AA makes interest payable if duty determined under Section 11A is not paid within three months from the date of such determination. The explanations to Section 11AA deal with reduction or enhancement of duty in appellate proceedings, but not with a case of remand and de novo adjudication. Where the appellate authority merely maintains the original duty demand, the original adjudication date remains the date of determination. Accordingly, for the demand of Rs. 4,12,050/-, the appellate order did not displace the original adjudication order dated 04.12.1996, and interest was payable from the expiry of three months from that date. For the demand of Rs. 6,20,103/-, the original order had been set aside in remand, so the de novo order dated 31.12.2003 was the operative determination; since that determination fell after the relevant statutory change, interest was not payable.

Conclusion: Interest was rightly sustained on Rs. 4,12,050/- and rightly set aside on Rs. 6,20,103/-.

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