Excise interest on differential duty cannot be levied when shortfall is voluntarily paid without default in scheduled duty payment.

Interest on differential excise duty was considered in the context of goods transferred to depots and consignment agents where the assessee, after applying the nearest-time valuation method under Rule 7 of the Central Excise Valuation Rules, 2000, paid the shortfall voluntarily on receipt of outlet information. On those facts, there was no default in the fortnightly or monthly duty payment schedule contemplated by the periodic collection rules, so Rule 173G(1)(d) of the Central Excise Rules, 1944 and Rule 8 of the Central Excise Rules, 2001/2002 could not be invoked to levy interest. The assessee's challenge succeeded and interest was held not payable.

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Issues: Whether interest was payable on differential excise duty when the assessee, on applying the valuation method for goods transferred to depots and consignment agents, paid the shortfall before the show-cause notice; and whether Rule 173G(1)(d) of the Central Excise Rules, 1944 and Rule 8 of the Central Excise Rules, 2001/2002 could be invoked in the absence of any default in the scheduled payment of duty.

Analysis: The assessee had transferred goods to depots and consignment agents, and where the actual sale value from such outlets was not available, it adopted the value nearest to the time of removal as contemplated by Rule 7 of the Central Excise Valuation Rules, 2000. The differential duty was worked out and paid on receipt of information from the outlets, and the payment was made voluntarily before any departmental instruction or effective action. On these facts, there was no failure to make fortnightly or monthly payment of duty in the manner contemplated by the cited collection rules, and the liability could not be treated as a delayed payment attracting interest.

Conclusion: The questions of law were answered in favour of the assessee. Interest was not payable, the impugned order was set aside, and the appeal was allowed.

Ratio Decidendi: Interest on excise duty cannot be levied under the periodic payment rules where the assessee has voluntarily discharged the differential duty upon determining the correct valuation and there is no default in the prescribed duty payment schedule.

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