Superseded excise rules cannot sustain a demand when the levy rests on an obsolete procedural provision.

A levy cannot rest on a rule from a superseded regulatory regime. Rule 7AA of the Central Excise Rules, 1944 was relied on for the demand, but the Central Excise (No. 2) Rules, 2001 had been framed in supersession of the earlier rules and created a new procedural framework. The Court held that Rule 7AA could not be treated as surviving under the new regime, so the show-cause notice and order-in-original were founded on an inoperative basis. The demand was therefore unsustainable, and the assessee succeeded on the issue.

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Issues: Whether Rule 7AA of the Central Excise Rules, 1944 continued to govern the levy after the Central Excise (No. 2) Rules, 2001 came into force, and whether the demand based on that rule was sustainable.

Analysis: The demand was founded on Rule 7AA, introduced by notification under the Central Excise Rules, 1944. The later Central Excise (No. 2) Rules, 2001 were framed in supersession of the earlier rules and specifically traced rule-making power to Section 37 of the Central Excise Act, 1944. The 2001 regime created a different procedural framework, and Rule 7AA framed under the 1944 rules could not be treated as surviving once the new rules had displaced the earlier set. Since the show-cause notice and the order-in-original proceeded as though Rule 7AA remained operative, the foundation of the demand was legally flawed.

Conclusion: The demand based on Rule 7AA was unsustainable, and the assessee succeeded on the issue.

Final Conclusion: The appellate challenge failed because the Tribunal was correct in holding that the old rule could not be relied upon after the new excise rules came into force.

Ratio Decidendi: When a later set of statutory rules is framed in supersession of the earlier rules, a levy or demand cannot be sustained by applying a rule from the superseded regime as though it continued in force.

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