Section 11D recovery cannot replace central excise duty; unsustainable demand also defeats related penalty and interest.

Recovery under Section 11D of the Central Excise Act could not be sustained because the amount collected as an additional surcharge had already suffered duty and the depot was duty-paid; such recovery was not a levy of duty under Section 3. On that basis, proceedings under Rule 9(2) read with Section 11A also failed. As the underlying demand was unsustainable, the proposed penalty and interest under Sections 11AC and 11AB were treated as consequential and likewise could not survive, and the demand with all related proceedings was set aside in favour of the assessee.

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Issues: Whether recovery could be sustained under Section 11D of the Central Excise Act, 1944, along with proceedings under Rule 9(2) and Section 11A of the Central Excise Act, 1944, and whether penalty and interest under Section 11AC and Section 11AB could survive.

Analysis: The amount collected as an additional surcharge had already suffered duty and the depot was duty paid. Recovery under Section 11D was held impermissible on the basis that such recovery is not a levy of duty under Section 3 of the Central Excise Act, 1944. On that foundation, recourse to Rule 9(2) read with Section 11A was also held unsustainable. Since the demand itself could not be upheld, the proposed penalty and interest were treated as consequential and equally incapable of being sustained.

Conclusion: The demand and all consequential proceedings were set aside in favour of the assessee.

Ratio Decidendi: Recovery under Section 11D cannot be used as a substitute for levy of central excise duty, and where the underlying demand is not legally sustainable, consequential penalty and interest provisions also fail.

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