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Issues: Whether the Department could demand and recover interest at 20% under Section 11AA and Section 11AB of the Central Excise Act, 1944 on amounts payable by the assessee pursuant to the Supreme Court's order, notwithstanding that the Supreme Court had fixed interest at 12% per annum from the date of recovery until repayment.
Analysis: The Supreme Court had already determined the repayment obligation and fixed the rate of interest at 12% per annum as part of the restitutionary consequence of the failed refund claims. The Department's power of recovery had therefore to conform to that order, whether the recovery was pursued under Section 11 of the Central Excise Act, 1944 or through restitution under Section 144 of the Code of Civil Procedure, 1908. Section 11AA was held inapplicable because there had been no determination of duty under Section 11A(2), no show-cause notice for erroneous refund under Section 11A, and no legal basis to substitute the statutory 20% rate for the rate expressly fixed by the Supreme Court. The attempt to treat 20% as an independent condition for instalments was rejected because the demand itself was anchored to Section 11AA and conflicted with the Supreme Court's directions.
Conclusion: The demand for interest at 20% was illegal and inoperative to the extent it conflicted with the Supreme Court's order, and the assessee was liable only to pay interest at 12% per annum as directed by the Supreme Court.
Ratio Decidendi: When the Supreme Court has fixed the rate of interest payable on repayment as part of a restitutionary order, the Department cannot invoke a different statutory interest provision to alter that rate unless the Supreme Court's order is first modified; recovery must strictly follow the terms of the binding judicial direction.
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