Rule 8 forfeiture and deferred duty payment: prior notice not required, but continuous deprivation beyond the prescribed period was impermissible.

Forfeiture of the deferred payment facility under Rule 8 was treated as a recovery consequence that could be imposed without a prior show cause notice where the duty defaults were disclosed in the assessee's returns and treated as admitted arrears, so the natural justice objection was rejected. Rule 8(4) was, however, read as permitting forfeiture only for the prescribed period and not as a continuous back-to-back deprivation for several months, so the order was modified to confine the forfeiture within the rule while leaving the department free to proceed as contemplated once dues remained unpaid.

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Issues: (i) Whether forfeiture of the facility of deferred payment of duty under Rule 8 could be made without issuing a show cause notice or granting a hearing; (ii) whether the forfeiture could operate continuously for multiple periods and beyond the permissible two-month span under Rule 8(4).

Issue (i): Whether forfeiture of the facility of deferred payment of duty under Rule 8 could be made without issuing a show cause notice or granting a hearing.

Analysis: The assessee was under the self-assessment regime, and the defaults were reflected in the returns filed by it. The Board instructions treated the unpaid duty as admitted arrears, and the recovery mechanism did not require proceedings under Section 11A of the Central Excise Act, 1944. In that setting, the authority held that a prior show cause notice was not necessary before invoking the forfeiture consequences prescribed by the rules.

Conclusion: The objection based on want of show cause notice and natural justice was rejected.

Issue (ii): Whether the forfeiture could operate continuously for multiple periods and beyond the permissible two-month span under Rule 8(4).

Analysis: Rule 8(4) was read as authorising forfeiture only for the prescribed period and not as permitting a continuous, back-to-back deprivation extending for several months. The authority held that the lower order had wrongly postponed and then aggregated the forfeiture periods into a continuous span, instead of making the forfeiture effective in accordance with the rule and the communication of the order. The department was, however, left free to order forfeiture till the dues were cleared in the manner contemplated by the rule.

Conclusion: Continuous forfeiture for eight months was held impermissible, and the order was modified to confine the forfeiture in accordance with Rule 8(4).

Final Conclusion: The appeals succeeded only to the extent of modification of the forfeiture period, and the impugned orders were not sustained in their original continuous form.

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