Limitation for excise duty and penalty proceedings runs from detection of the default, barring notices issued after six months.

Section 40(2) of the Central Excises and Salt Act was applied to proceedings for duty and penalty arising from illegal removal without payment of duty, including statutory infractions and omissions. The cause of action was treated as accruing when the department detected the alleged evasion during a surprise check and gained knowledge of the default. Because the show cause notice was issued more than six months later, the initiation of proceedings was held to be beyond the statutory limitation period, and the levy of duty and penalty could not stand.

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Issues: Whether the proceedings for levy of duty and penalty were barred by limitation under Section 40(2) of the Central Excises and Salt Act.

Analysis: Section 40(2) was held to apply generally to legal proceedings for anything done or ordered to be done under the Act, including illegal omissions and infractions of statutory requirements. The cause of action was taken to accrue when the department detected the alleged evasion during the surprise check and obtained knowledge of the offending removal without duty payment. Since the show cause notice was issued more than six months after that date, the initiation of proceedings was beyond the statutory period.

Conclusion: The proceedings were time-barred and the impugned levy of duty and penalty could not stand.

Ratio Decidendi: For proceedings under Section 40(2), limitation runs from the accrual of the cause of action or the date of detection of the illegal omission, and proceedings initiated after six months are barred.

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