Excise duty collections treated as duty demand under Section 11D do not automatically attract interest or penalty provisions.

Amounts collected from customers as representing excise duty, where no duty was actually payable by the assessee, are recoverable under Section 11D of the Central Excise Act rather than treated as excise duty payable by the assessee. On that basis, Section 11AB interest is not attracted because the statutory trigger of non-levy, non-payment, short levy, short payment, or erroneous refund is absent. For the same reason, Section 11AC penalty cannot be sustained without a clear statutory foundation, and reliance on Rule 173Q is improper where that rule was not invoked in the notice. The stated effect is that interest and penalty demands fail in the absence of the necessary statutory basis.

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Issues: Whether amounts collected from customers as representing excise duty, though not payable by the appellant as duty, could attract interest under Section 11AB of the Central Excise Act, 1944 and penalty under Section 11AC of the Central Excise Act, 1944, and whether penalty could be sustained with reference to Rule 173Q of the Central Excise Rules, 1944.

Issue (i): Whether interest under Section 11AB of the Central Excise Act, 1944 was payable on the amounts collected as representing duty.

Analysis: Amounts collected as representing duty are liable to be paid to the Government only under Section 11D of the Central Excise Act, 1944. Such collections are not themselves excise duty already payable by the appellant, and the appellant was not the person liable to pay the duty on the goods in question. The statutory basis for interest under Section 11AB, which applies to duty of excise not levied, not paid, short levied, short paid, or erroneously refunded, was therefore absent.

Conclusion: Interest under Section 11AB was not leviable and the demand was unsustainable.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act, 1944, with reference to Rule 173Q of the Central Excise Rules, 1944, was sustainable.

Analysis: Penalty under Section 11AC required a statutory foundation linked to the specified situations of non-levy, non-payment, short levy, short payment, or erroneous refund of duty. The amounts involved were only sums collected as representing duty and not duty payable by the appellant. The reference to Rule 173Q was also unsustainable where the show cause notice did not invoke that rule. In the absence of the requisite statutory provisions, want of bona fides by itself could not justify the penalty.

Conclusion: Penalty under Section 11AC was not leviable and the purported reliance on Rule 173Q was erroneous.

Final Conclusion: The appellant succeeded, and the demands of interest and penalty were set aside.

Ratio Decidendi: Amounts collected merely as representing excise duty are exigible to Government under Section 11D, but where they do not constitute duty payable by the appellant, interest and penalty provisions applicable to non-payment or short payment of duty cannot be invoked without a clear statutory basis.

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