Departmental supervision and limitation defeat excise demand where clearances were not clandestine and notice was time-barred.

Clearances made under departmental supervision and with the excise department's express permission could not be treated as clandestine removals or removals in contravention of prescribed procedure, so Rule 9(2) of the Central Excise Rules, 1944 was inapplicable. The demand was also time-barred because the show cause notice covered an earlier period and was issued beyond the six-month limitation contemplated by Section 11A of the Central Excise Act, 1944. On those facts, the notice was unsustainable and liable to be quashed.

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Issues: Whether the show cause notice demanding duty under Rule 9(2) of the Central Excise Rules, 1944 could be sustained when the clearances were made with the knowledge and consent of the excise department and whether the notice was barred by limitation under Section 11A of the Central Excise Act, 1944.

Analysis: The admitted facts showed that the petitioner's clearances were made under departmental supervision and with the express permission of the excise , so there was no clandestine removal without assessment. On that footing, Rule 9(2) could not be invoked, since it applies only to removals in contravention of the prescribed procedure. The notice also covered an earlier period and was issued beyond the six-month period contemplated by Section 11A, making the demand time-barred in the circumstances of the case.

Conclusion: The show cause notice was unsustainable and liable to be quashed, and the issue was decided in favour of the petitioner.

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