Limitation for excise duty demand fails where no valid show cause notice supports extended period recovery.

Limitation under Central Excise law controlled the duty demand because the earlier departmental letter did not function as a valid show cause notice: it did not require a proper reply and did not specify the duty demand in the required manner. The later notice also failed to allege suppression, fraud, wilful misstatement, or similar grounds needed for the extended limitation period. As only the normal period applied, the demand for older clearances was time-barred and could not be sustained.

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Issues: Whether the demand for duty raised under the notice dated 31-10-1980 was barred by limitation, and whether the earlier departmental letter dated 8-12-1977 could be treated as part of the demand so as to save limitation.

Analysis: The dispute turned on the operation of the limitation provisions under the Central Excise law and on whether the earlier departmental communication could be regarded as a valid show cause notice or demand. The majority held that the letter dated 8-12-1977 did not satisfy the essential requirements of a show cause notice, since it did not call upon the assessee to show cause to a proper authority and did not specify the duty amount in the manner required for a valid demand. The formal notice dated 31-10-1980 contained no allegation of suppression, fraud, wilful mis-statement, or similar grounds necessary to invoke the extended period. On the facts, the normal period of limitation alone applied, and the demand relating to clearances made long before the notice could not be sustained.

Conclusion: The demand was barred by time. The appeal was allowed and the orders of the lower authorities were set aside.

Ratio Decidendi: A demand for excise duty beyond the normal limitation period cannot be sustained unless the notice validly alleges the statutory grounds for extended limitation, and an informal departmental communication that does not meet the requirements of a show cause notice cannot be treated as such to save limitation.

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