Defective show cause notice defeats excise demand on fire-destroyed procured goods under concessional procurement rules.

Duty foregone on indigenously procured goods destroyed in a fire was treated as recoverable only through the machinery of Section 11A read with Rule 6 of the 2001 Rules, because that rule deems goods not to have been used for the intended purpose even when lost or destroyed by natural causes or unavoidable accidents. The demand, however, could not be sustained because the show cause notice and corrigendum did not invoke Section 11A or Rule 6 and proceeded on a different basis. As the alleged infringement arose from the interaction of the notification and Rule 6, the defective notice was material and the central excise demand failed.

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Issues: Whether duty foregone on indigenously procured goods destroyed in a fire accident was recoverable, and whether the recovery could be sustained when the show cause notice did not invoke the correct statutory provisions.

Analysis: The goods were procured under the concessional duty notification and the relevant concessional-removal rules. Rule 6 of the 2001 Rules deems goods not to have been used for the intended purpose even where they are lost or destroyed by natural causes or unavoidable accidents, and recovery is contemplated with the machinery of Section 11A and Section 11AB of the Central Excise Act, 1944. However, the show cause notice and corrigendum did not invoke Section 11A or Rule 6, and instead proceeded on a different basis. Since the alleged infringement arose only from the interaction of the notification with Rule 6, the defect in the notice was material and the demand could not be sustained in the form issued.

Conclusion: The demand of central excise duty on the destroyed indigenously procured goods was not sustainable on the basis of the defective show cause notice.

Ratio Decidendi: Where recovery under concessional procurement rules depends on Section 11A read with Rule 6, a demand cannot be upheld if the show cause notice fails to invoke those provisions and is otherwise defective.

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