Optional duty payment scheme under Rule 49A did not create an independent levy of interest on cotton yarn duty.

Rule 49A of the Central Excise Rules, 1944 made payment of duty on cotton yarn along with duty on cotton fabrics optional, operating only when the manufacturer applied for and obtained permission. Although the rule referred to an amount described as interest on yarn duty, it did not create an independent charging provision for levy of interest. As no application had been made to avail the facility under Rule 49A, and the competent authority had earlier recorded that the rule was optional, interest was not chargeable. The refund claim could not be rejected on that basis, and the appeals were allowed in favour of the assessee.

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Issues: Whether interest was payable under Rule 49A of the Central Excise Rules, 1944 in the absence of an express charging provision and where no application was made to avail the facility under that rule.

Analysis: Rule 49A contemplated payment of duty on cotton yarn along with duty on cotton fabrics only when the manufacturer made an application and obtained permission. The rule also prescribed an amount described as interest on yarn duty, but the Tribunal found that the provision did not create an independent charging provision authorising levy of interest. The Tribunal further noted that in the appellant's own case the competent authority had recorded that Rule 49A was optional and that, since no application had been made, interest under the rule was not chargeable. That view had attained finality.

Conclusion: Interest under Rule 49A of the Central Excise Rules, 1944 was not payable, and the refund claim could not be denied on that basis. The appeals were therefore allowed in favour of the assessee.

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