Central Excise Rule Invalidated: High Court Quashes Rs. 1,000 Daily Interest, Orders Recalculation at 2% Monthly Rate.

The HC declared Rule 8(3) of the Central Excise Rules, 2002, ultra vires to Section 11AB of the Central Excise Act, 1944, invalidating the provision for interest at Rs. 1,000 per day. The Court mandated adherence to the uniform interest rate of 2% per month or 24% per annum, as prescribed by the Central Government. Consequently, the writ petition was allowed, demand notices were quashed, and interest on delayed payments was ordered to be recalculated according to the correct statutory rate.

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Issues:
1. Challenge to the vires of Rule 8(3) of the Central Excise Rules, 2002.
2. Interpretation of Section 11AB of the Central Excise Act, 1944.
3. Validity of the provision for interest calculation under Rule 8(3).
4. Discrepancy between the Rule and the Parent Act regarding interest rates.
5. Determining the correct method for charging interest on delayed payments.

Issue 1: The petitioner challenged the vires of Rule 8(3) of the Central Excise Rules, 2002, questioning the phrase "Rs. 1,000/- per day or whichever is higher" as arbitrary and violative of constitutional articles. The contention was that the rule exceeded the authority granted by the parent Act in quantifying interest charges.

Issue 2: Section 11AB of the Central Excise Act allows for interest on delayed duty payment, with the Central Government authorized to fix the rate. The rule in question, Rule 8(3), imposed interest at a rate of two percent per month or Rs. 1,000 per day, whichever is higher, leading to a dispute over the method of interest calculation.

Issue 3: The petitioner argued that the rule's provision for interest calculation was beyond the scope of the Parent Act, as it did not align with the uniform rate of interest intended by Section 11AB. The rule's alternative ceiling for interest rates was deemed arbitrary and not in line with the Act's provisions.

Issue 4: The judgment highlighted that the Central Government's discretion in fixing interest rates within the prescribed limits of 10% to 36% per annum aimed to ensure uniformity in interest charges. Deviating from this uniformity by providing an alternative ceiling of Rs. 1,000 per day was considered a violation of the Act's intent.

Issue 5: The Court concluded that Rule 8(3) was ultra vires to Section 11AB of the Act and held the provision invalid. It was determined that interest on delayed payments should be calculated at a rate of 2% per month or 24% per annum, as notified by the State Government within the permissible limits of the Act.

In conclusion, the judgment declared the part of Rule 8(3) providing for interest at Rs. 1,000 per day as invalid, emphasizing the need for adherence to the uniform rate of interest prescribed by the Central Government. The writ petition was allowed, demand notices were quashed, and interest on delayed payments was to be recomputed based on the correct interest rate as per the Act.

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