Interest on differential duty limited to net liability where excess and short payments are adjusted before adjudication.

For the period before the amendment broadening the levy of interest, interest was not chargeable where differential duty had been paid before issue of the show cause notice and had not been determined through adjudication. The text also notes that excess duty payment and short payment should be netted off to arrive at the real differential liability, so interest is confined to the net amount and not the entire demand initially raised. On that basis, the assessee's interest liability was limited to the net differential duty, and the amount paid under protest, after adjustment, was refundable in accordance with law.

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Issues: Whether interest was payable on the differential duty paid by the assessee before issuance of the show cause notice and whether the interest already paid under protest could be refunded after adjusting liability, if any, against excess duty payment.

Analysis: The relevant period preceded the amendment introducing a broader basis for levy of interest. For that period, interest could not be charged where duty had been paid before issuance of the show cause notice and duty had not been determined under the adjudicatory provisions. The Court also accepted that excess duty payment and short payment had to be netted off for working out the real differential liability. On that basis, interest could be computed only on the net differential duty amount and not on the entire amount initially demanded.

Conclusion: The assessee was not liable to pay interest on the full amount demanded. Interest was restricted to the net differential duty of Rs. 3,77,833, and after such computation and adjustment against the amount paid under protest, the balance was directed to be refunded in accordance with law.

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