Demand notices, limitation, and provisional assessment under excise law were tested against stay orders, payment appropriation, and natural justice.

Demands under the earlier notices of 4.5.1981 and addenda of 5.5.1981 were treated as valid because they were issued within limitation, were not cancelled or superseded by the later notice, and were supported by retrospective validation under the Finance Act, 1982. The later notice of 5.6.1982 was held, by majority, not to be time-barred for the disputed period because the High Court stay was treated as excluding time under Section 11A(1), while no valid Rule 9B provisional assessment was proved. Payments made under the Supreme Court's interim order were allowed to be appropriated towards earlier lawful dues, but the Superintendent's finalisation of alleged provisional assessments was set aside for want of notice and hearing.

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Issues: (i) whether the demands covered by the notices dated 4.5.1981 and addenda dated 5.5.1981 were barred by limitation or had lapsed on issue of the later notice dated 5.6.1982; (ii) whether the notice dated 5.6.1982 was time-barred for the period 1.4.1981 to 5.12.1981 in view of the High Court stay order and the plea of provisional assessment; (iii) whether the amount paid pursuant to the Supreme Court's interim order could be appropriated towards earlier disputed demands; and (iv) whether the Superintendent could finalise the alleged provisional assessments without prior notice and opportunity.

Issue (i): Whether the demands covered by the notices dated 4.5.1981 and addenda dated 5.5.1981 were barred by limitation or had lapsed on issue of the later notice dated 5.6.1982.

Analysis: The notices of 4.5.1981 were issued within six months from the relevant period and were not expressly cancelled, superseded, withdrawn, or replaced by the later notice. The later notice of 5.6.1982 only covered a wider period and did not extinguish the earlier notices, which were separately adjudicated. The retrospective validation under Section 51 of the Finance Act, 1982, read with the amendment to Rules 9 and 49, supported recovery, and the earlier notices remained effective.

Conclusion: The notices dated 4.5.1981 and addenda dated 5.5.1981 were valid and the demands were not barred by limitation.

Issue (ii): Whether the notice dated 5.6.1982 was time-barred for the period 1.4.1981 to 5.12.1981 in view of the High Court stay order and the plea of provisional assessment.

Analysis: The majority held that the Delhi High Court's interim order, granted in terms of prayer (a), restrained the department by necessary implication from serving notice and taking steps for levy and collection on the same basis as the Board's directive. The period of such stay was therefore excludable under the Explanation to Section 11A(1). The plea of provisional assessment failed because no valid order under Rule 9B was shown and no bond was executed. The dissent took the view that the stay order restrained collection and levy, but not service of notice, and would have treated part of the demand as time-barred.

Conclusion: By majority, the notice dated 5.6.1982 was not time-barred for the disputed period and the demand was sustainable.

Issue (iii): Whether the amount paid pursuant to the Supreme Court's interim order could be appropriated towards earlier disputed demands.

Analysis: The amounts paid were made against the duty liability for the relevant period and, absent a contemporaneous specific appropriation by the payer, the department could apply the payment towards lawful dues in order of time. Section 11 of the Central Excises and Salt Act, 1944 also empowered deduction of sums due from money in the officer's hands or control. The majority therefore upheld the adjustment; the dissent considered the payments earmarked for later dues and not open to such appropriation.

Conclusion: By majority, the appropriation made by the department was valid.

Issue (iv): Whether the Superintendent could finalise the alleged provisional assessments without prior notice and opportunity.

Analysis: No valid provisional assessment under Rule 9B was established. Even otherwise, an order affecting civil consequences required prior notice and opportunity. Since the Superintendent acted without issuing a fresh notice or hearing before finalisation, the order was vitiated by breach of natural justice.

Conclusion: The order finalising the alleged provisional assessments was set aside.

Final Conclusion: The Tribunal upheld the earlier duty demands and the departmental appropriation of payments, but struck down the superintendent's finalisation order for want of notice and hearing, resulting in a partly favourable outcome for both sides.

Ratio Decidendi: Where a court order restrains the department from proceeding on the same basis as the directive under challenge, the restraint may, by necessary implication, extend to service of demand notice under Section 11A(1); however, absent a valid Rule 9B order, provisional assessment cannot be inferred merely because the matter was sub judice.

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