Limitation barred excise duty demand despite successor liability surviving transfer of business.

Central excise duty liability on short-found cotton yarn could survive transfer of the business because Rule 230 preserved the Department's right to recover leviable duty from a successor in business, and a State relief undertaking notification could not extinguish liability under the Central Excises and Salt Act, 1944. However, the demand failed because the notice was issued beyond the six-month limitation period under old Rule 10 of the Central Excise Rules, 1944, and no valid basis existed to apply a five-year period. The demand was therefore time-barred, with consequential relief to the assessee.

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Issues: Whether the demand of Central Excise duty on the short-found quantity of cotton yarn was sustainable against the purchaser of the mill, and whether the demand was barred by limitation.

Analysis: The liability for duty was held to continue despite transfer of the business, as Rule 230 of the Central Excise Rules, 1944 preserved the Department's right to recover leviable duty from the successor in business. The plea based on the Maharashtra relief undertaking notification was rejected because a State notification could not extinguish liability under the Central Excises and Salt Act, 1944. However, the notice demanding duty was issued beyond the six-month period prescribed by old Rule 10 of the Central Excise Rules, 1944, and no basis existed for extending limitation to five years.

Conclusion: The demand was held to be time-barred, and the appeal succeeded on that ground with consequential relief to the assessee.

Ratio Decidendi: A demand of central excise duty made beyond the prescribed limitation period is unenforceable even if the underlying duty liability otherwise survives against a successor in business.

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