Mandatory show cause notice for compounded levy duty recovery defeats time-barred demand under central excise law.

Recovery of duty under the compounded levy scheme could not be sustained without a show cause notice under Section 11A of the Central Excise Act, as the Tribunal applied the view that statutory notice was mandatory for arrears arising from non-discharge of duty liability under Rule 96ZP. The demand also failed on limitation because it was raised for a past period on the basis of an ACP order and the notice was issued beyond the permissible time. The claim was therefore unsustainable on both the notice requirement and time-bar grounds.

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Issues: Whether recovery of duty under the compounded levy scheme could be sustained without issuing a show cause notice under Section 11A of the Central Excise Act, 1944, and whether the demand was barred by limitation.

Analysis: The Tribunal noted that the High Court had declined reference on the question whether issuance of a show cause notice under Section 11A was mandatory for recovery of arrears arising from non-discharge of duty liability under Rule 96ZP, and had relied on the Supreme Court's view that compliance with Section 11A was mandatory. The Tribunal also found that the demand had been raised on the basis of the ACP order for a past period and that the show cause notice was issued beyond the permissible period, thereby attracting limitation.

Conclusion: The demand could not be sustained, as the statutory notice requirement applied and the claim was time-barred.

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