Interest on transit-loss duty under Central Excise law is not recoverable without the statutory ingredients of evasion or suppression.

Interest under Section 11AB of the Central Excise Act, 1944 was treated as not recoverable on duty confirmed for transit loss of petroleum products moved under warehousing procedure, because the duty was paid within the prescribed period and the record did not establish fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. For the period before 11.05.2001, the unamended provision applied only where short-levy or non-levy arose from such culpable conduct, and the amended regime could not be used retrospectively for earlier liabilities. The article notes that penalty was dropped and that these statutory conditions for interest were not met.

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Issues: (i) whether interest under Section 11AB of the Central Excise Act, 1944 was payable on duty demanded for transit loss of petroleum products moved to warehousing locations without payment of duty; (ii) whether interest for the period prior to 11.05.2001 was legally sustainable in the absence of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty.

Issue (i): whether interest under Section 11AB of the Central Excise Act, 1944 was payable on duty demanded for transit loss of petroleum products moved to warehousing locations without payment of duty.

Analysis: The duty involved arose from shortage beyond the permissible transit-loss limit while moving petroleum products under warehousing procedure. The record showed that the appellants paid the duty within the prescribed period and that the lower authorities had dropped penalty, which indicated that the case was not one involving fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. In such a situation, the preconditions for fastening interest under the provision were not satisfied. The conclusion was also supported by the later binding judicial view in an identical transit-loss dispute.

Conclusion: Interest under Section 11AB of the Central Excise Act, 1944 was not leviable on the duty confirmed for transit loss in the facts of the case.

Issue (ii): whether interest for the period prior to 11.05.2001 was legally sustainable in the absence of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty.

Analysis: For the period before the 2001 amendment, Section 11AB applied only where short-levy or non-levy resulted from the specified culpable conduct. The amendment effective from 11.05.2001 expanded the coverage, but the transitional sub-section excluded duties that became payable earlier. Since the authorities themselves had not sustained the penalty proposal and the dispute did not rest on any of the culpable ingredients required by the unamended provision, interest for the earlier period could not be sustained. The Tribunal also treated the prior binding judicial outcome as closing the controversy.

Conclusion: Interest for the period prior to 11.05.2001 was not sustainable.

Final Conclusion: The demand of interest on the confirmed transit-loss duty was unsustainable in law, and the assessee was entitled to relief.

Ratio Decidendi: Interest on short-paid duty for transit loss is not recoverable under Section 11AB of the Central Excise Act, 1944 unless the statutory conditions for that levy are satisfied, and the pre-amendment provision cannot be applied where the case does not involve the requisite culpable conduct.

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