Interest on delayed cess requires a substantive charging provision; borrowed excise machinery alone cannot sustain the demand.

Interest on delayed payment of cess was treated as a substantive liability that could not be imposed by borrowing Section 11AA of the Central Excise Act without a corresponding extension in the cess enactments and without the requisite determination under Section 11A(2). The court also noted that earlier stay orders did not create immunity from interest as a matter of principle, because a party withholding payment under interim protection may still be liable in an appropriate case. Even so, that circumstance did not support the impugned notice, which was quashed for lack of statutory authority.

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Issues: (i) Whether interest on delayed payment of cess could be levied by invoking Section 11AA of the Central Excise Act, 1944, in the absence of a corresponding amendment in the cess enactments and without determination under Section 11A(2) of that Act; (ii) whether the stay orders passed during earlier proceedings prevented the respondents from recovering interest on the delayed cess payment.

Issue (i): Whether interest on delayed payment of cess could be levied by invoking Section 11AA of the Central Excise Act, 1944, in the absence of a corresponding amendment in the cess enactments and without determination under Section 11A(2) of that Act.

Analysis: The cess enactments made the provisions of the Central Excise law applicable for levy and collection, but they did not contain any substantive provision authorising recovery of interest on delayed payment. Section 11AA was inserted later in the Central Excise Act, 1944, and no corresponding amendment was made in the cess enactments to extend that liability. The machinery of Section 11AA also presupposed a determination of duty under Section 11A(2), which had not been made in the present case. Interest on delayed payment is a substantive liability and cannot be imposed merely by borrowing the collection machinery.

Conclusion: Section 11AA could not be invoked to demand interest from the petitioner, and the impugned notice was invalid on this ground.

Issue (ii): Whether the stay orders passed during earlier proceedings prevented the respondents from recovering interest on the delayed cess payment.

Analysis: The Court distinguished the statutory liability question from the effect of interim protection granted by court orders. It held that a party that withheld payment under the shelter of a stay order could still, in an appropriate case, be made liable to pay interest. However, that circumstance did not validate the impugned statutory demand in the present case, because the notice itself was not supportable under the relevant enactments.

Conclusion: The stay orders did not create immunity from interest as a matter of principle, but they did not sustain the impugned notice.

Final Conclusion: The demand notice for interest on delayed payment of cess was quashed, while the respondents were left free to pursue interest through an independent legal remedy.

Ratio Decidendi: Interest on delayed payment of cess can be recovered only when the statute governing the levy contains a substantive charging provision for such interest, and the borrowed machinery of another enactment cannot create that liability in the absence of a corresponding statutory extension and the requisite determination of duty.

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