Clandestine removal and Section 11A: duty demand on approved clearances under Rule 9(2) was unsustainable.

Rule 9(2) of the Central Excise Rules, 1944 applies only to removals made in contravention of Rule 9(1), that is, clandestine removals without the prescribed gate pass procedure. A differential duty demand based on reclassification of clearances already made under an approved classification list under Rule 173B did not amount to clandestine removal and could not be sustained under Rule 9(2). The demand also failed because it was not determined under Section 11A of the Central Excises & Salt Act, 1944, which was necessary for such a demand. The demand was therefore unsustainable and the assessee succeeded.

---

---

Issues: Whether duty demand could be sustained under Rule 9(2) of the Central Excise Rules, 1944 for clearances made under an approved classification list, and whether the demand was invalid for want of invocation of Section 11A of the Central Excises & Salt Act, 1944.

Analysis: Rule 9(2) applies only where goods are removed in contravention of Rule 9(1), namely clandestine removal without following the prescribed gate pass procedure. The demand in the show cause notice was based on reclassification and differential duty for clearances already covered by an approved classification list under Rule 173B. Such a situation does not amount to clandestine removal and cannot attract Rule 9(2). The demand was also not determined under Section 11A, though that provision was necessary for such a demand.

Conclusion: The demand was unsustainable and the appeal succeeded in favour of the assessee.

Ratio Decidendi: A duty demand for non-clandestine clearances under an approved classification list cannot be made under Rule 9(2) of the Central Excise Rules, 1944, and if the demand is not determined under Section 11A of the Central Excises & Salt Act, 1944, it cannot be sustained.

---