Excise duty must be assessed on goods actually cleared, and time-barred demand notices fail without extended-period allegations.

The HC held that five show cause-cum-demand notices were barred by limitation because they were issued beyond the ordinary six-month period and did not plead fraud, collusion, wilful misstatement, or suppression to trigger the extended period. It also held that a demand notice seeking to load the assessable value of chassis cleared with four tyres by the value of two tyres was unsustainable, because excise duty under the self-removal and valuation scheme must be based on goods actually cleared, not on a notional configuration reflected in the classification list. All six impugned notices were set aside in favour of the assessee.

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Issues: (i) Whether the five show cause-cum-demand notices, issued beyond the ordinary six-month period and without any allegation attracting the extended period, were barred by limitation under the excise recovery provision. (ii) Whether the notice dated 20 February 1985, proposing to load the assessable value of chassis cleared with four tyres by the value of two additional tyres merely because the classification list referred to six tyres, was sustainable in law.

Issue (i): Whether the five show cause-cum-demand notices, issued beyond the ordinary six-month period and without any allegation attracting the extended period, were barred by limitation under the excise recovery provision.

Analysis: The statutory scheme permits recovery of short-levied duty by notice within six months from the relevant date, and the extended period applies only where fraud, collusion, wilful misstatement, or suppression of facts is pleaded. The impugned five notices related to an earlier period, were issued much later, and contained no allegation invoking the extended period.

Conclusion: The five notices were barred by limitation and were rightly liable to be struck down, in favour of the assessee.

Issue (ii): Whether the notice dated 20 February 1985, proposing to load the assessable value of chassis cleared with four tyres by the value of two additional tyres merely because the classification list referred to six tyres, was sustainable in law.

Analysis: Under the self-removal and valuation scheme, duty is chargeable on the goods actually removed from the factory gate. The classification list and price list reflected the manufactured goods and the options available to buyers, but they did not compel clearance only in the full specified configuration. Where the chassis were in fact cleared with four tyres, the department could not assess duty on a notional basis by adding the value of two tyres not supplied.

Conclusion: The notice dated 20 February 1985 was without jurisdiction and unsustainable, in favour of the assessee.

Final Conclusion: All six impugned notices were set aside, and the challenge succeeded in full.

Ratio Decidendi: Excise duty must be assessed on the goods actually cleared from the factory gate, and a demand notice is without jurisdiction if it seeks to recover duty on a hypothetical valuation or is issued beyond limitation without invoking the statutory extended period.

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