Excise duty paid by honoured cheque does not create short payment; delayed departmental presentation cannot justify interest or penalty.

Interest under the Central Excise Act was held not leviable where duty cheques issued by the assessee were honoured and the amounts were ultimately credited, because there was no short levy, non-levy, or short payment within section 11A(2). Delay by the departmental officer in presenting the cheques did not change the character of the payment, and the department could not later disown acceptance through its own officer. Penalty enhancement was also found unsustainable on the same facts, with consequential relief granted to the assessee.

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Issues: Whether interest under the Central Excise Act could be demanded, and penalties enhanced, where cheque payments issued by the assessee were honoured but credited to the department after a delay in presentation.

Analysis: Demand of interest under section 11AA arises only when there is a determination under section 11A(2) that duty has been short levied, not levied, or short paid. Here, the cheques issued by the assessee were honoured, the amounts were ultimately credited, and the assessee had taken credit in the PLA against those honoured cheques. On those facts, there was no short levy or short payment and no demand of duty. The delay in presenting the cheques by the departmental officer did not alter the character of the payment, and the departmental acceptance of payment through that officer could not later be disowned.

Conclusion: The demand of interest was not sustainable, and the enhancement of penalties was also not sustainable, in favour of the assessee.

Final Conclusion: The impugned orders were set aside with consequential relief to the assessee.

Ratio Decidendi: Where cheques issued towards excise duty are honoured and the duty stands paid, delayed departmental presentation of the cheques does not create short payment so as to attract interest under section 11AA.

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