Excise duty recovery turns on Rule 10 covering nil assessments and notices surviving despite citation errors.

Clearances reflected in classification lists, gate passes, RT-12 returns and departmental assessments could not be treated as clandestine removals, so a demand under Rule 9(2) failed on those facts. The exemption under Notification No. 119/66 was denied because the prescribed raw-material conditions were not satisfactorily proved, and the burden of establishing eligibility for exemption was not discharged. Rule 10 was held to cover even nil assessments, treating duty that ought to have been paid as short-levied, so the demand was sustainable under that rule and not Rule 10A. A notice citing Rule 9(2) was not invalid where the demand could otherwise be sustained within Rule 10, subject to the three-month limitation.

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Issues: (i) whether the clearances could be treated as clandestine removal so as to sustain demand under Rule 9(2) of the Central Excise Rules; (ii) whether the appellants were entitled to the benefit of Notification No. 119/66 dated 16-7-1966; and (iii) whether the demand was recoverable under Rule 10 rather than Rule 10A, and whether a notice issued under Rule 9(2) could support such demand.

Issue (i): whether the clearances could be treated as clandestine removal so as to sustain demand under Rule 9(2) of the Central Excise Rules

Analysis: The clearances were reflected in the classification list, gate passes, RT-12 returns and departmental assessments. The records showed that the department had knowledge of the manufacture and clearance of the goods. On those facts, the removals could not be characterised as removal in contravention of Rule 9(1). Rule 9(2) applies only where goods are removed clandestinely or without assessment.

Conclusion: The allegation of clandestine removal failed and the demand under Rule 9(2) was untenable, in favour of the assessee.

Issue (ii): whether the appellants were entitled to the benefit of Notification No. 119/66 dated 16-7-1966

Analysis: The notification exempted specified copper and copper alloy products only when made from the prescribed raw materials, including scrap on which duty had been paid. The appellants had added other metals and had not satisfactorily established compliance with the conditions of the notification to the satisfaction of the revenue. The burden to show eligibility for exemption was not discharged.

Conclusion: The appellants were not entitled to the exemption under Notification No. 119/66, against the assessee.

Issue (iii): whether the demand was recoverable under Rule 10 rather than Rule 10A, and whether a notice issued under Rule 9(2) could support such demand

Analysis: Rule 10 was construed to cover even nil assessments, since the expression relating to duty "paid" is to be understood as duty that ought to have been paid. The demand therefore fell within Rule 10 and not Rule 10A. The notice was not invalid merely because it referred to Rule 9(2), since the competent officer could sustain the demand under Rule 10 on the same facts. However, recovery was confined to the period of three months from the date when duty ought to have been paid.

Conclusion: The demand was sustainable under Rule 10, subject to the three-month limitation, against the assessee.

Final Conclusion: The appeal succeeded only to the extent that the penalty was set aside and the demand was confined within the permissible limitation period, while the exemption claim failed and the duty demand was otherwise sustained.

Ratio Decidendi: For recovery of excise duty, Rule 10 covers even cases of nil assessment, because duty that ought to have been paid is treated as short-levied, and a notice is not invalid merely because it cites a different rule when the underlying demand is otherwise within jurisdiction.

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