Defective duty-demand notice on goods not yet removed was treated as void, though fresh non-accountal proceedings remained open.

A duty-demand notice for fully manufactured goods lying in the factory and not yet removed was defective where it proceeded on suppression and Rule 9(1), because duty was shown to arise only on clearance after proper accounting. The adjudication based on that notice was therefore invalid, and the assessee's relief was sustained. The commentary also notes that the department remained free to pursue fresh proceedings on non-accountal, confiscation and penalty through lawful notice before the competent authority.

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Issues: Whether a show cause notice demanding duty on fully manufactured goods lying in the factory, while alleging suppression and invoking Rule 9(1), was ab initio void and incapable of adjudication by the Assistant Collector.

Analysis: The notice demanded duty on goods found unaccounted in the factory and alleged fraud, wilful misstatement and suppression with intent to evade duty. The goods had not been removed, and the adjudication order itself showed that duty would arise only at the stage of clearance after due accounting. In that setting, a duty demand based on removal-related provisions was defective. Where the Superintendent chose to issue a duty-demand notice on allegations of suppression, the notice was treated as fundamentally defective, and the Assistant Collector ought to have corrected the notice before proceeding to adjudicate it. At the same time, the department's right to proceed on the distinct issue of non-accountal, confiscation and penalty was preserved through fresh notice and lawful adjudication by the competent authority.

Conclusion: The notice and the adjudication based on it were held invalid, and the order in favour of the assessee was sustained, while leaving the department free to initiate fresh proceedings on non-accountal in accordance with law.

Ratio Decidendi: A duty-demand notice in respect of goods lying in the factory and not yet removed, when framed on an incorrect basis and with defective invocation of the charging/procedural provision, is ab initio void and cannot be validly adjudicated without proper correction and lawful notice.

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