Compounded levy interest cannot be imposed without express statutory authorisation; duty demand under Rule 5 was remanded.

Duty assessed under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 was not finally sustained because the validity of Rule 5 was pending before the Supreme Court; the duty demand was remanded for reconsideration after that decision. On interest, the compounded levy scheme did not expressly authorise levy of interest, and the demand for interest was therefore set aside. The matter thus resulted in partial success, with the duty issue left open for fresh adjudication and the interest component eliminated.

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Issues: (i) whether the demand of duty based on determination of annual production capacity under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 could be finally sustained when the validity of Rule 5 was pending before the Supreme Court; and (ii) whether interest was leviable on the duty liability under the compounded levy scheme.

Issue (i): whether the demand of duty based on determination of annual production capacity under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 could be finally sustained when the validity of Rule 5 was pending before the Supreme Court.

Analysis: The annual capacity had been determined by applying the scheme in Rule 3 and the deeming provision in Rule 5, which fixes annual capacity at the actual production of 1996-97 where the formula yields a lower figure. The dispute on the correctness and vires of Rule 5 was stated to be pending before the Supreme Court. In that situation, the determination of annual capacity and the consequential duty demand were not treated as fit for final adjudication by the Tribunal.

Conclusion: The duty demand was remanded to the adjudicating authority to be decided after the Supreme Court's on the challenge to Rule 5.

Issue (ii): whether interest was leviable on the duty liability under the compounded levy scheme.

Analysis: The liability to interest was examined in light of the Supreme Court's ruling that, under the compounded levy scheme governed by Section 3A, interest cannot be imposed unless the enabling provision specifically stipulates it. As the scheme did not provide for levy of interest in the manner attempted, the demand for interest could not survive.

Conclusion: The interest demand was set aside.

Final Conclusion: The appeal succeeded in part: the duty-related issue was sent back for fresh consideration after the pending Supreme Court decision, while the interest demand was eliminated.

Ratio Decidendi: Under the compounded levy scheme, interest cannot be levied unless the statutory scheme expressly authorises it, and a duty demand founded on a rule whose validity is under challenge may be remanded for reconsideration.

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