Duty demand on internal molasses removal failed where no prohibition, no suppression allegation, and no competent notice existed.

Duty demand on removal of molasses to a kachcha pit within the factory was not accepted because no prohibition was shown to exist on the relevant date. The show cause notice also failed on limitation, as it contained no allegation of wilful misstatement, suppression of facts, or intent to evade duty, so the extended period could not be invoked. The notice was further held invalid because it was issued by an officer lacking the requisite competence. On these grounds, the demand was treated as unsustainable on merits, limitation, and authority.

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Issues: (i) whether duty could be demanded on removal of molasses to a kachcha pit inside the factory when no prohibition then existed; (ii) whether the show cause notice was barred by limitation in the absence of allegation of wilful mis-statement or suppression of facts; (iii) whether the notice was invalid for having been issued by an incompetent officer.

Issue (i): whether duty could be demanded on removal of molasses to a kachcha pit inside the factory when no prohibition then existed.

Analysis: Duty demand was examined against the admitted fact that the goods were moved to a kachcha pit within the factory and, on the relevant date, there was no prohibition shown to exist against such removal. In that situation, the basis for treating the movement as giving rise to a duty demand was not accepted.

Conclusion: The demand on this ground was not sustainable.

Issue (ii): whether the show cause notice was barred by limitation in the absence of allegation of wilful mis-statement or suppression of facts.

Analysis: The notice was found to contain no allegation of wilful mis-statement, suppression of facts, or intent to evade duty. In that backdrop, the extended demand could not be sustained, and the notice was held to be beyond time.

Conclusion: The demand was barred by limitation.

Issue (iii): whether the notice was invalid for having been issued by an incompetent officer.

Analysis: The authority issuing the notice was tested against the statutory requirement governing issuance of notices for extended demands. On that basis, the issuing officer was found not competent to issue the notice for the demand made.

Conclusion: The notice was invalid on this ground as well.

Final Conclusion: The demand order was unsustainable on merits, limitation, and competence, and the assessee obtained full relief.

Ratio Decidendi: A duty demand and notice cannot survive where the alleged removal does not attract duty on the facts found, no allegation exists to justify the extended period of limitation, and the notice is issued by an lacking the requisite competence.

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