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2005 (8) TMI 134 - HC - Central ExciseInterest on delayed payment of duty or erroneous refund - challenge the vires of Rule 8(3) of the Central Excise Rules, 2002 - HELD THAT:- Section 11AB clearly relates to charge of rate of interest related to amount in default for the period, the assessee remains in default of payment. Permitting charge of interest at the rate of Rs. 1,000/- per day is not computable in relation to amount of Duty in default. Whether Rs. 1,00,000/- is not paid in time or Rs. 1,000/- is not paid in time, the interest chargeable under the Rules remains Rs. 1,000/- per day. Such a device is not permitted by Parent Act. Therefore, to the extent rule provides other than the rate of interest as an alternative mode of levy of interest per day not connected with the amount of duty in default is beyond enabling power of the Parent Act. The Rule 8(3) to the extent it provides after providing the rate of interest chargeable on delayed payment of duty, an alternative mode to provide higher ceiling limit is clearly in violation of Rule 11AB and cannot be sustained. Since the alternative mode is severable from the other part of the provision without affecting its efficacy, it does not require that the entire rule is to be struck down. We therefore, hold that Rule 8(3) to the extent it provides levy of interest at the rate of Rs. 1,000/- which is higher as alternative to charge of interest @ 2% on the amount of Duty means to be understood as 24% per annum on the amount of Duty in default is ultra vires to Section 11AB of the Act and cannot be sustained and is held inoperative. Accordingly, the writ petition is allowed. The part of Rule 8(3) which includes expression "at the rate of two per cent, per month or rupees one thousand per day, whichever is higher" is held to be invalid. Consequently, interest chargeable on delayed payment had to be only at the rate of 2% per month or for that matter 24% per annum as notified by the State Government in terms of the Section 11BC, which is between the permissible limits in 'terms of Section 11AB. Consequently, the demand notices are quashed and interest on delayed payment has to be recomputed only to the extent it is referred to the rate of interest @2% per month or 24% per annum under Rule 8(3). There shall be no order as to costs.
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