Prior notice is mandatory for excise short-levy recovery; demand fails where the statutory procedure is not followed.

A demand for excise duty treated as a short levy could not be sustained without prior notice under Rule 10 of the Central Excise Rules. The notices themselves showed that the duty was being recovered as a short levy, so the mandatory notice procedure had to be followed before recovery. Rule 173-I(i) did not cure the defect because it only permitted assessment on the basis of returns and did not dispense with notice after the alleged short levy was discovered. The demand notices and the appellate order were therefore quashed.

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Issues: Whether a demand of excise duty described as a short levy could be sustained without a prior notice under Rule 10 of the Central Excise Rules.

Analysis: The notices themselves showed that the duty had been treated as short levied. In such a case, Rule 10 required prior notice before recovery could be made. Rule 173-I(i) did not assist the revenue, because it only enabled the proper officer to assess on the basis of the return and did not cure the absence of notice after the alleged short levy was discovered. Since no prior notice had been issued before the impugned demand notices, the levy was in breach of the mandatory procedure.

Conclusion: The demand could not be sustained and the impugned notices and appellate order were quashed.

Ratio Decidendi: A demand for short levy of excise duty is invalid unless the statutory procedure requiring prior notice is followed.

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