Erroneous excise credit leading to under-assessment is short-levy under Rule 10, not a residuary collection error.

Erroneous credit of excise duty on raw aluminium under Rule 56A caused the finished products to be assessed at less than the full duty otherwise leviable. The resulting deficiency was treated as short-levy and under-assessment, not a mere clerical error in collection. On that basis, Rule 10 of the Central Excise Rules, 1944, governed recovery and excluded the residuary Rule 10A. Because Rule 10 carried a three-month limitation, a notice issued beyond that period could not support recovery.

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Issues: Whether the demand raised for the period May 1966 to 24 February 1968 was governed by Rule 10 of the Central Excise Rules, 1944 as a case of short-levy and under-assessment, or by the residuary Rule 10A as a mere error in collection arising from wrong credit under Rule 56A.

Analysis: The finished products were assessed on the footing that credit of excise duty paid on the raw aluminium had been available under Rule 56A. That credit was extended even to aluminium flat bar sections covered by Item 27(d), although the benefit had not been correctly applicable to that material. Once such credit was wrongly allowed, the finished products stood assessed at less than the full duty otherwise leviable, because the duty paid on the raw material had to be set off against the duty on the finished products. The resulting deficiency was therefore not a mere clerical mistake in collection; it amounted to under-assessment and short-levy. On that footing, the assessment had to be reopened, and Rule 10, not Rule 10A, furnished the applicable recovery provision. Since Rule 10 carried a three-month limitation, the notice issued long after that period could not be sustained as a valid notice under that rule.

Conclusion: The demand notice was not maintainable under Rule 10A, and the recovery was barred because Rule 10 alone applied.

Ratio Decidendi: Where erroneous credit of duty paid on raw material leads to assessment of the finished product at less than the full duty leviable, the case is one of short-levy and under-assessment governed by Rule 10, and the residuary Rule 10A is excluded.

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