Penal interest on excise licence fee cannot be levied where no subsisting licence or admitted liability existed.

Penal interest could not be levied on licence fee deposited after the excise vend licence had not been renewed and the business remained closed. Under the applicable rules, the licence stood determined on expiry of the financial year if not renewed, so no subsisting licence existed and no licence fee was legally payable for those years. Because the amount was deposited pursuant to court order during the dispute, it was not a delayed discharge of an admitted liability. Penal interest under Section 24-A could arise only on non-payment of licence fee within the prescribed time, which was not established on the facts. The demand was therefore unsustainable and quashed.

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Issues: Whether penal interest could be levied on the licence fee deposited by the petitioner for the period during which the excise vend licence was not renewed and the business remained closed.

Analysis: The licence was not renewed after March 1995 and, under the applicable rules, a licence stands determined on expiry of the financial year if not renewed. For the period in question, the petitioner had no subsisting licence to run the business, and therefore no licence fee was legally payable for those years. The amount was nevertheless deposited pursuant to the court order and in the course of the dispute, so the payment could not be treated as a delayed discharge of an admitted liability. Penal interest under Section 24-A could arise only on non-payment of licence fee within the prescribed time, which was not the position on the facts found.

Conclusion: The demand for penal interest was not sustainable and was rightly quashed. The issue is decided in favour of the assessee.

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