Clandestine removal requirement limits excise demand; post-clearance price revision and unpleaded Section 11D could not sustain recovery.

Rule 9(2) of the Central Excise Rules, 1944 applies only to clandestine removal of excisable goods without assessment, so a demand and penalty based on post-clearance price refixation could not be sustained where the goods were cleared with the department's knowledge. Section 11A did not cure that defect because the notice was essentially founded on Rule 9(2). Section 11D could not be relied on either, as it was not invoked in the show-cause notice and could not be introduced to support the demand at the stay stage. The commentary concludes that these points gave the assessee a strong prima facie case against recovery.

---

---

Issues: (i) Whether demand of central excise duty and penalty could be sustained under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944 when the goods had been cleared with the knowledge of the department and without clandestine removal. (ii) Whether Section 11D of the Central Excise Act, 1944 could be invoked in respect of the subsidy received by the assessee.

Issue (i): Whether demand of central excise duty and penalty could be sustained under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944 when the goods had been cleared with the knowledge of the department and without clandestine removal.

Analysis: Rule 9(2) applies only where excisable goods are removed clandestinely and without assessment. Goods cleared after payment of duty and with the department's knowledge do not attract that provision. The demand was founded on a post-clearance price refixation and not on any surreptitious removal. The reliance on Section 11A did not assist the Revenue because the notice was essentially under Rule 9(2), and the rule could not be expanded beyond its basic requirement of clandestine removal.

Conclusion: The demand and penalty were not sustainable under Rule 9(2) read with Section 11A, and this issue was decided in favour of the assessee.

Issue (ii): Whether Section 11D of the Central Excise Act, 1944 could be invoked in respect of the subsidy received by the assessee.

Analysis: Section 11D was not invoked in the show-cause notice, and the attempt to sustain the demand on that basis could not be accepted at the stay stage. The alleged duty element embedded in the subsidy could not be used to justify the confirmed demand when the notice itself did not rest on that provision.

Conclusion: Section 11D could not be relied upon to sustain the demand in the present proceedings, and this issue was decided in favour of the assessee.

Final Conclusion: The assessee established a strong prima facie case for complete relief against recovery, and the confirmed duty and penalty were stayed.

Ratio Decidendi: Rule 9(2) can be invoked only for clandestine removal without assessment, and a demand founded on post-clearance price revision or subsidy cannot be sustained where the goods were cleared with the department's knowledge.

---