Accrued tax liabilities survive omission of the enabling provision, and a delayed interest demand may still stand if raised within a reasonable time.

Liability incurred under the compounded levy scheme remained enforceable for the period when the scheme was operative, because the omission of Section 3A did not extinguish accrued liabilities where Section 38A preserved prior operation and rights. The analysis also states that, where no express limitation period applies, recovery must be initiated within a reasonable time on the facts; on the admitted timeline, the demand for interest on delayed payment was treated as having been raised within a reasonable period. The writ challenge was therefore rejected on both the statutory continuity point and the delay objection.

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Issues: (i) Whether omission of the compounded levy scheme wiped out the assessee's liability for the period when the scheme was operative. (ii) Whether the demand for interest on delayed payment was liable to be quashed for delay.

Issue (i): Whether omission of the compounded levy scheme wiped out the assessee's liability for the period when the scheme was operative.

Analysis: The liability arose during the currency of Section 3A of the Central Excise Act, 1944 and the corresponding compounded levy arrangement under Rule 96ZP of the Central Excise Rules, 1944. The Court distinguished the precedents dealing with omission of a rule or expiry of a temporary statute and noted that Section 38A of the Central Excise Act, 1944 expressly preserved the previous operation of the rule, notification or order and liabilities incurred thereunder. The omission of Section 3A did not, therefore, extinguish liabilities already accrued while the scheme was in force.

Conclusion: The issue was answered against the assessee.

Issue (ii): Whether the demand for interest on delayed payment was liable to be quashed for delay.

Analysis: The governing principle was that where no express limitation period is prescribed, recovery must be initiated within a reasonable time, assessed on the facts of the case. On the admitted facts, the assessee had undertaken to pay duty with interest and the last payment was made on 31-3-2003, while the demand was raised on 19-8-2005. In those circumstances, the demand was held to have been raised within a reasonable period.

Conclusion: The issue was answered against the assessee.

Final Conclusion: The writ petition failed on both questions of law and fact, and the challenge to the demand was rejected.

Ratio Decidendi: Liabilities incurred under a tax scheme remain enforceable despite subsequent omission of the enabling provision where the statute preserves prior rights and liabilities, and a demand raised within a reasonable time is not liable to be struck down merely because no fixed limitation is prescribed.

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