Amended duty regime on inputs in stock upheld, but penalty and interest were set aside absent culpable default.

Duty liability arising from credit taken on inputs lying in stock under an amended fiscal regime was upheld because the liability flowed from the changed rule itself, and not from any dispute over entitlement or from financial hardship. Penalty and interest were, however, set aside because the credit had been validly taken when availed and the subsequent obligation arose only by operation of the amended provisions, without suppression, wrongful conduct, or other culpable default. The result was that the duty demand remained payable, but no penalty or statutory interest was sustained.

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Issues: (i) Whether the duty demand was sustainable against the assessee for the amount attributable to credit taken on inputs lying in stock on the relevant date; (ii) whether penalty and interest were exigible in the facts of the case.

Issue (i): Whether the duty demand was sustainable against the assessee for the amount attributable to credit taken on inputs lying in stock on the relevant date.

Analysis: The liability to pay the amount arose from the amended duty regime and the related rule requiring reversal/payment in respect of inputs in stock. The assessee did not dispute the liability itself, and financial hardship was held to be irrelevant to the existence of duty liability. The demand was therefore upheld.

Conclusion: The duty demand was sustained and the assessee was held liable to pay the amount.

Issue (ii): Whether penalty and interest were exigible in the facts of the case.

Analysis: The credit had been validly taken when availed, and the subsequent liability arose only by operation of the amended rules. The liability did not arise from any wrongful act or omission such as suppression or similar conduct. No sufficient legal basis was shown for imposing penalty or for levying interest under the invoked provision.

Conclusion: The penalty and interest demand were set aside.

Final Conclusion: The appeal succeeded only to the extent of relief from penalty and interest, while the duty demand remained undisturbed.

Ratio Decidendi: Where a duty liability arises solely by subsequent amendment of the fiscal regime and not from any culpable act or omission by the assessee, penalty and statutory interest predicated on default-like conduct are not automatically attracted.

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