Section 11D demand notice failed for lack of prior hearing, no retrospective operation, and unmet statutory preconditions.

A demand under Section 11D of the Central Excise Act was held unsustainable because it was issued without prior notice and an opportunity of hearing, contrary to natural justice and the statutory procedure. Section 11D was also held to be prospective: it was inserted from 20.09.1991, and no express legislative intent showed retrospective operation, so it did not cover the relevant period. The provision's preconditions were further found unmet because the amount demanded did not satisfy the statutory test of duty collected as excise duty in excess of duty assessed or determined. The impugned demand notice was quashed.

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Issues: (i) Whether the demand notice could be sustained without a prior show cause notice and opportunity of hearing; (ii) whether Section 11D of the Central Excise Act, 1944 operated retrospectively to cover the relevant period; (iii) whether the assessee's case satisfied the conditions for invocation of Section 11D.

Issue (i): Whether the demand notice could be sustained without a prior show cause notice and opportunity of hearing.

Analysis: A demand under the section, when issued without first putting the assessee on notice and without affording an opportunity to explain its case, offends the principles of natural justice. The statutory procedure contemplated by the provision also supports notice and consideration of representation before a demand is determined.

Conclusion: The demand notice was bad in law on this ground and could not be sustained.

Issue (ii): Whether Section 11D of the Central Excise Act, 1944 operated retrospectively to cover the relevant period.

Analysis: The section was inserted only from 20.09.1991 and there was no express legislative indication making it retrospective. The mere fact that later amendments were given retrospective effect did not justify reading retrospectivity into the original provision. The relevant period in the notice predated the insertion of the section.

Conclusion: Section 11D was held to be prospective and did not apply to the relevant period.

Issue (iii): Whether the assessee's case satisfied the conditions for invocation of Section 11D.

Analysis: The provision applies to a person liable to pay duty who has collected an amount in excess of the duty assessed or determined and has collected it as representing excise duty. The assessee's liability was in relation to aluminium, and the duty attributable to aluminium had already been paid. The demand sought to treat an element embedded in the sale price as collected duty on electricity, but that did not satisfy the statutory preconditions for Section 11D.

Conclusion: The preconditions for invoking Section 11D were not met, and the demand could not be justified under that provision.

Final Conclusion: The impugned demand notice was quashed and the writ petition succeeded.

Ratio Decidendi: A demand under Section 11D of the Central Excise Act, 1944 is unsustainable unless the statutory preconditions are satisfied and the assessee has been given notice and an opportunity of hearing; the provision does not operate retrospectively in the absence of express legislative intent.

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