Excise demand needs valid statutory backing; inapplicable rules cannot sustain the levy, and a dated exemption did not cover transferees.

An excise demand cannot be upheld unless it rests on a valid statutory provision; here, Rule 10A lacked proper backing and Rule 9(2) was inapplicable because there had been no earlier levy and the clearances were known to the excise authorities, so the levy failed. The exemption under Notification No. 131/62 did not extend to transferee-operators because the licence was personal and non-transferable, and the transferees applied only after the specified cutoff date, so the exemption was unavailable. The demand was invalid, but the claimed exemption was also denied.

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Issues: (i) whether the excise demand could be sustained under Rule 10A or Rule 9(2) of the Central Excise Rules; and (ii) whether the transferee-operators were entitled to the exemption under Notification No. 131/62 dated 13-6-1962.

Issue (i): Whether the excise demand could be sustained under Rule 10A or Rule 9(2) of the Central Excise Rules.

Analysis: The demand was originally made under Rule 10A. The validity of that route depended on the rule having proper statutory backing, and the Court followed its earlier view that a similarly unsupported rule could not sustain a levy. The department then sought to support the demand under Rule 9(2), but that provision was held inapplicable because there had been no earlier levy and the clearances had been made with the knowledge of the excise authorities, who had not taken the steps contemplated by that rule.

Conclusion: The demand could not be sustained under either Rule 10A or Rule 9(2), and the levy was invalid.

Issue (ii): Whether the transferee-operators were entitled to the exemption under Notification No. 131/62 dated 13-6-1962.

Analysis: The notification granted exemption to specified iron and steel products but excluded manufacturers applying for licence on or after 13-6-1962. The licence under the excise rules was personal to the licensee and not transferable. The transferees applied for licence only on 16-10-1963, well after the critical date, and could not claim to be continuing the transferor's licence for the purpose of the exemption.

Conclusion: The petitioners were not entitled to the exemption under the notification.

Final Conclusion: The writ petition succeeded because the demand was not legally sustainable, even though the claimed exemption was not available to the petitioners.

Ratio Decidendi: An excise demand must rest on a valid statutory provision and cannot be upheld by invoking an inapplicable rule, while an exemption limited to manufacturers applying for licence before a specified date does not extend to transferees where the licence is personal and non-transferable.

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