Demand based on substituted excise rules fails where the show cause notice cites provisions no longer in force.

A show cause notice based on rules that had already been substituted before the notice date could not sustain the excise demand or penalty. The notice invoked Rule 57S(1)(ii) read with Rule 57Q and Rule 51A of the Central Excise Rules, 1944, even though those provisions had been replaced by the Cenvat Rules. Retrospective application of the substituted provisions was rejected, and reliance on retrospective construction of an exemption notification was held inapposite because the demand was not founded on the new provision. The demand and penalty were therefore unsustainable.

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Issues: Whether a show cause notice issued under rules which had already been substituted and were not in force on the date of issuance could sustain the duty demand and penalty.

Analysis: The notice was issued invoking Rule 57S(1)(ii) read with Rule 57Q and Rule 51A of the Central Excise Rules, 1944, although those provisions had been replaced by the Cenvat Rules before the notice date. The substituted provisions could not be treated as retrospectively applicable on the facts, and the reliance on retrospective construction of an exemption notification was held inapposite because the demand itself was not founded on the new provision.

Conclusion: The show cause notice was unsustainable, and the demand and penalty based on it could not be upheld.

Ratio Decidendi: A demand founded on provisions that were not in force on the date of the show cause notice is invalid, and retrospective operation cannot be assumed merely because the earlier rules were substituted.

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