Strict construction of exemption notifications and valid show cause notice requirements govern central excise duty demands.

A strict construction applied to the exemption under Sl. No. 9 of Notification No. 162/86-C.E.: chassis qualify only when meant for the specified three-axled motor vehicles, and not merely because they are chassis for special-purpose vehicles under another heading. On that reading, the chassis in question were outside the notification. The text also reiterates that a central excise demand for a later period must rest on a valid show cause notice under Section 11A, clearly covering the relevant period and proposed duty; an omnibus or unspecified notice is insufficient, so a demand beyond the notice cannot be sustained.

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Issues: (i) Whether chassis manufactured for special purpose motor vehicles were eligible for concessional duty under Sl. No. 9 of Notification No. 162/86-C.E.; (ii) Whether the demand for duty for the subsequent period could be sustained without a proper show cause notice under Section 11A of the Central Excise Act, 1944.

Issue (i): Whether chassis manufactured for special purpose motor vehicles were eligible for concessional duty under Sl. No. 9 of Notification No. 162/86-C.E.

Analysis: The exemption under Sl. No. 9 covered three-axled motor vehicles other than articulated vehicles falling under Headings 87.02 or 87.04 and the chassis therefor. The benefit was confined to chassis meant for the specified vehicles and could not be extended to chassis meant for vehicles falling under Heading 87.05 merely because they were chassis. The notification had to be read according to its express wording, and the chassis in dispute did not satisfy that description.

Conclusion: The chassis were not eligible for the exemption, and the demand on this issue was upheld against the assessee.

Issue (ii): Whether the demand for duty for the subsequent period could be sustained without a proper show cause notice under Section 11A of the Central Excise Act, 1944.

Analysis: A demand for central excise duty must be preceded by a valid show cause notice specifying the period and the duty sought to be recovered. A mere omnibus reference to future or unspecified clearances was insufficient to satisfy the statutory requirement. Since the notice did not properly cover the later demand, the confirmation of duty for that period could not stand.

Conclusion: The demand for the later period was set aside, and this issue was decided in favour of the assessee.

Final Conclusion: The appeals were disposed of by sustaining the demand on exemption eligibility while quashing the later-period demand for want of a valid notice.

Ratio Decidendi: An exemption notification must be construed strictly according to its express terms, and a demand of excise duty cannot be confirmed unless preceded by a valid show cause notice under the statute.

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