Limitation under Section 11A barred recovery of excise duty on recorded shortages; remaining quantity sent back for fresh adjudication.

Limitation under Section 11A of the Central Excise Act, 1944 governed recovery of short-levied duty on the major shortage: the shortage had been recorded since 1976, but the notice was issued only in 1986, and Rule 223A of the Central Excise Rules, 1944 could not override the statutory bar. The principal demand was therefore time-barred. The remaining shortage required de novo adjudication because the earlier order had not addressed the explanations that part of the quantity represented evaporation, handling loss and rounding off, and part represented production lying in the factory. The matter was remanded for fresh finding on that limited issue.

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Issues: (i) Whether the demand of duty on the major portion of the shortage was barred by limitation under Section 11A of the Central Excise Act, 1944; (ii) whether the de novo adjudication required further examination on the limited question of the balance shortage.

Issue (i): Whether the demand of duty on the major portion of the shortage was barred by limitation under Section 11A of the Central Excise Act, 1944.

Analysis: The shortage of 37.868 metric tonnes had come to light in 1976 itself and had been reflected in the records for years. The notice was issued only in 1986. Rule 223A of the Central Excise Rules, 1944, which regulates stock verification, could not displace the statutory limitation for recovery of short-levied duty under Section 11A. The record did not show any duty payment on the deficient quantity.

Conclusion: The demand for the major portion of the shortage was time-barred and the finding was in favour of the assessee.

Issue (ii): Whether the de novo adjudication required further examination on the limited question of the balance shortage.

Analysis: The adjudication order did not deal with the explanation that about 1.221 metric tonnes represented loss due to evaporation, handling and rounding off, and that about 1.604 metric tonnes represented production of the relevant day lying in the factory. The earlier remand had required a clear finding on these explanations, but the matter had again been decided without addressing them.

Conclusion: The matter was remanded for de novo adjudication on the limited question of the balance shortage, in favour of the assessee to that extent.

Final Conclusion: The appeal succeeded substantially on limitation for the principal demand, while the remaining disputed shortage was sent back for fresh decision.

Ratio Decidendi: For recovery of short-levied excise duty, the limitation under Section 11A of the Central Excise Act, 1944 applies, and a stock-verification rule cannot override that statutory bar.

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