Wrong credit recovery under Central Excise law cannot be enlarged by a later notional rate; limitation challenge also failed.

Wrong credit under Rule 56A of the Central Excise Rules, 1944 is recoverable only to the extent of the credit actually taken or utilised, and the demand cannot be enlarged by applying a later notional rate under Rule 9A(3A); the further demand on that basis was therefore not sustainable. The review show cause notice was issued within the period prescribed under Section 35A(3)(b) of the Central Excises & Salt Act, 1944, because it followed service of the earlier order and payment within the admitted dates. The appeal succeeded on merits, although the limitation objection failed.

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Issues: (i) Whether the further demand raised by applying Rule 9A(3A) of the Central Excise Rules, 1944 was sustainable, and (ii) whether the review show cause notice was barred by limitation.

Issue (i): Whether the further demand raised by applying Rule 9A(3A) of the Central Excise Rules, 1944 was sustainable.

Analysis: The demand under appeal arose from the Collector's order, not from the Assistant Collector's earlier order recovering duty on the input. The recoverable amount had to be confined to the wrong credit actually allowed on the input under Rule 56A, because the credit taken during the relevant period was only at the rate then applicable. Rule 56A(5) specifically dealt with recovery of wrong credit allowed or utilised. The later notional rate as on the date of the Assistant Collector's order could not govern the recovery of the amount already wrongly credited.

Conclusion: The further demand based on Rule 9A(3A) was not sustainable and this issue was decided in favour of the assessee.

Issue (ii): Whether the review show cause notice was barred by limitation.

Analysis: The facts showed service of the Assistant Collector's order on 23.10.1980 and payment of the demanded duty on 7.11.1980. On those admitted dates, the review show cause notice issued on 16.4.1981 fell within the period prescribed by Section 35A(3)(b) of the Central Excises & Salt Act, 1944.

Conclusion: The review show cause notice was within time and this issue was decided against the assessee.

Final Conclusion: The appeal succeeded because the impugned demand could not be sustained on merits, although the limitation objection failed.

Ratio Decidendi: Where duty credit has been wrongly allowed under Rule 56A of the Central Excise Rules, 1944, recovery is confined to the wrong credit actually taken or utilised and cannot be enhanced by applying a later notional rate under Rule 9A(3A) to the date of the recovery order.

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