Compensatory interest on delayed excise duty upheld only at 24% per annum; penalty deleted for recorded payment delay.

Interest on delayed central excise duty had to be computed in line with the compensatory statutory scheme, so the levy at Rs. 1,000 per day was unsustainable and interest was confined to 24% per annum. Penalty under Rule 25 of the Central Excise Rules, 2002 was not justified because the default was limited to delayed monthly payment and the transaction remained properly reflected in statutory records. The order was therefore modified to sustain only the interest liability at 24% per annum and to delete the penalty, granting partial relief to the assessee.

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Issues: (i) Whether interest for delayed payment of central excise duty could be restricted to 24% per annum and the levy of interest at Rs. 1,000 per day under the relevant rule was sustainable; (ii) Whether penalty under Rule 25 of the Central Excise Rules, 2002 was justified in the facts of the case.

Issue (i): Whether interest for delayed payment of central excise duty could be restricted to 24% per annum and the levy of interest at Rs. 1,000 per day under the relevant rule was sustainable.

Analysis: The interest levy on delayed payment had to conform to the statutory scheme governing compensatory interest on duty in default. The Tribunal followed the High Court rulings which had held that the alternative levy of Rs. 1,000 per day was not connected with the amount of duty in default and, to that extent, could not be sustained. The permissible levy was therefore to be computed at the rate of 24% per annum.

Conclusion: The interest demand was upheld only to the extent of computation at 24% per annum and the levy at Rs. 1,000 per day was held unsustainable.

Issue (ii): Whether penalty under Rule 25 of the Central Excise Rules, 2002 was justified in the facts of the case.

Analysis: The appellant's default was confined to delayed monthly payment of duty, while the transaction remained reflected in the statutory records. On those facts, the Tribunal found no basis to sustain a penal action under Rule 25.

Conclusion: The penalty under Rule 25 of the Central Excise Rules, 2002 was set aside.

Final Conclusion: The order was modified by sustaining only the interest liability at 24% per annum and deleting the penalty, resulting in partial relief to the assessee.

Ratio Decidendi: Interest for delayed duty payment must remain compensatory and linked to the amount in default, and a penalty cannot be sustained where the default is only a recorded delay in payment without circumstances justifying penal action.

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