Limitation for short-levied excise duty and compelled payment under demand notice justified restitution under Section 72.

Recovery of short-levied excise duty had to be initiated within the limitation period prescribed by the rules, counted from the relevant date of removal or payment; a demand raised beyond that period was time-barred and illegal. A payment made after a demand notice was not voluntary merely because a trade notice granted partial remission, since the demand carried an element of compulsion and the trade notice had no statutory force. Restitution under Section 72 of the Indian Contract Act, 1872 was therefore maintainable, and the refund order with interest was left undisturbed.

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Issues: (i) whether the claim for excise duty short levied beyond three months from the date of removal was barred by limitation; (ii) whether the payment of one-third of the differential duty pursuant to the demand notice and trade notice was a voluntary payment so as to exclude restitution under Section 72 of the Indian Contract Act, 1872.

Issue (i): Whether the claim for excise duty short levied beyond three months from the date of removal was barred by limitation.

Analysis: The demand related to short levy of excise duty after goods had been removed from the factory. On the applicable rule, recovery of short levied duty had to be initiated within the prescribed period, counted from the date on which the duty ought to have been paid or adjusted. The Court followed the earlier binding view that there was no power to keep the liability alive beyond that period and that the department could not recover escaped duty outside the limitation prescribed by the rules.

Conclusion: The claim was time-barred and the demand notice was illegal.

Issue (ii): Whether the payment of one-third of the differential duty pursuant to the demand notice and trade notice was a voluntary payment so as to exclude restitution under Section 72 of the Indian Contract Act, 1872.

Analysis: The payment was made after a demand notice had been issued, which necessarily carried the implication of coercive recovery in default of payment. The trade notice granting remission of part of the demand did not have statutory force and did not convert the payment into a purely voluntary one. In these circumstances, the remittance was treated as a payment made under compulsion and not as a free and voluntary discharge of liability.

Conclusion: The payment was not voluntary and restitution was maintainable under Section 72 of the Indian Contract Act, 1872.

Final Conclusion: The Revenue's appeal failed, and the decree directing refund of the amount with interest was left undisturbed.

Ratio Decidendi: Recovery of short-levied excise duty must be made within the limitation period prescribed by the rules, and a payment made in response to a demand notice cannot be treated as voluntary merely because a trade notice offers remission of part of the demand.

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