Retrospective excise liability cannot by itself create interest or penalty without separate statutory conditions being met.

Retrospective amendment requiring reversal or payment of 8% on exempted goods could sustain the underlying fiscal liability, but not interest for the prior period because interest was treated as a consequence of default and could not be imposed retrospectively. The text also states that penalty under the central excise scheme was unavailable absent proof of fraud, wilful misstatement, suppression of facts, collusion, or intent to evade duty, and that the amount payable for exempted goods was not treated as duty for penalty purposes under the cited provisions. On the stated facts, the substantive demand remained, while interest and penalty were set aside.

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Issues: (i) Whether interest was chargeable on the amount payable under the retrospective amendment requiring reversal/payment of 8% of the value of exempted goods. (ii) Whether penalty was imposable in the absence of established fraud, wilful misstatement, suppression of facts, or intent to evade duty.

Issue (i): Whether interest was chargeable on the amount payable under the retrospective amendment requiring reversal/payment of 8% of the value of exempted goods.

Analysis: Interest was held to be payable only on default and was treated as a quasi-punishment. Where the underlying liability itself was introduced retrospectively, the retrospective amendment could not be used to fasten interest for a prior period. The reasoning followed the principle that retrospectivity may create the substantive liability, but it does not authorise imposition of interest with retrospective effect.

Conclusion: Interest was not chargeable and the finding was in favour of the assessee.

Issue (ii): Whether penalty was imposable in the absence of established fraud, wilful misstatement, suppression of facts, or intent to evade duty.

Analysis: Penalty under the central excise scheme could be sustained only where the statutory ingredients for penal liability were satisfied, including fraud, wilful misstatement, collusion, suppression of facts, or contravention with intent to evade duty. The amount payable for exempted goods was not treated as duty for the purpose of penalty under the cited provisions, and the precedents relied upon held that Section 11AC could not be applied where the statutory preconditions were absent. On the facts, no finding of suppression or intent to evade was established.

Conclusion: Penalty was not imposable and the finding was in favour of the assessee.

Final Conclusion: The substantive demand of 8% on exempted clearances was maintained, but the accessories of interest and penalty were set aside, leaving the assessee partially successful.

Ratio Decidendi: A retrospective fiscal amendment may sustain the underlying liability, but it cannot retrospectively create liability to interest or penalty unless the statutory conditions for such consequences, including intent to evade where required, are independently established.

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