Ultra vires levy cannot sustain consequential interest and penalty when duty has already been paid.

Where duty liability had already been discharged, the Tribunal held that consequential interest and penalty under Rule 96ZP could not survive because the levy itself had been declared ultra vires by the Supreme Court. The impugned confirmation of interest and penalty was therefore set aside, while the confirmed duty liability remained undisturbed. The assessee succeeded only to that extent, with relief confined to the challenge against interest and penalty.

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Issues: Whether interest and penalty imposed under Rule 96ZP of the Central Excise Rules, 1944 were sustainable when the duty liability had already been discharged.

Analysis: The dispute before the Tribunal was confined to the levy of interest and penalty for the defaulted period, the duty demand itself having already been paid. Relying on the Supreme Court ruling that the levy of interest and penalty under Rule 96ZP was ultra vires, the Tribunal held that the impugned confirmation of interest and penalty could not be sustained. The confirmation of duty liability was left undisturbed.

Conclusion: The demand of interest and the penalty were set aside and the appeal was allowed to that extent.

Final Conclusion: The assessee succeeded only on the challenge to interest and penalty, while the duty liability as confirmed was maintained.

Ratio Decidendi: Where the levy itself is held ultra vires, consequential interest and penalty imposed under that levy cannot survive.

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