(1) THIS is an appeal against the judgment and order of a division bench of the High court at Allahabad dismissing a writ petition filed by the appellants.

(2) THE appellants manufacture sugar at a factory at Laksar in Saharanpur District of the State of Uttar Pradesh. They are liable to pay excise duty and additional and special duties of excise. They made a claim for exemption within the provisions of an Exemption Notification dated 28/4/1978, issued under sub-rule (1 of Rule 8 of the central Excise Rules, 1944, whereby free sugar and levy sugar produced in a sugar factory during the period 1/5/1978 to 30/9/1978 was exempt at the rate therein specified if it was in excess of the average production of the corresponding period of the preceding three sugar years. On 6/10/1978 an order was made by the Chief Accounts Officer, central Excise, Kanpur, which stated that the appellants rebate claim had been pre-audited as admissible under the said Notification and, on the excess production of sugar eligible for rebate of 62,022.76 quintals, rebate was admissible in the sum of Rs. 15,59,252.18.

(3) ON 30/7/1979 the Superintendent, central Excise, Hardwar, issued to the appellants a notice. It stated that the appellants "were erroneously sanctioned rebate of Rs. 15,59,252.18 ... as against Rs. 12,90,966.42 on excess production of 62,022.76 quintals of sugar achieved during the period from 1/5/1978 to 15/8/1978 ...". The notice set out the details of the rebate granted and the details of clearances and stated that, from these details, "it is obvious that the factory has availed exemption in excess by Rs. 2,68,285.76 which was not admissible to them". The appellants were required to show cause why such excess rebate "granted to them erroneously should not be recovered from them under Rule 10 of the central Excise Rules, 1944".

(4) THE appellants showed cause and contended that the notice was time-barred under Rule 10. The period of six months by which time the notice to demand the amount back should have been issued expired on 17/4/1979. Since the notice had been issued on 30/7/1979, which was beyond the period of six months, the demand was time-barred. The notice did not mention that the refund of duty had been obtained by fraud, collusion, wilful misstatement or suppression of fact, which attracted the limitation period of five years. The entire data having been divulged to the authorities at the time the claim was preferred, there was no justification for the notice after the period of six months. The reply to the notice also dealt with the merits of the claim to the rebate.

(5) ON 10/2/1983 the Assistant Collector of central Excise, Saharanpur, confirmed the demand made by the notice. He dealt first with the merits of the claim to rebate and then stated:

"SINCE the amount of rebate was much more than the duty actually paid the party should have informed the department about this fact and also should have themselves paid the excess amount by making a debit entry in the P/L A/C and the .206 free sale sugar which they have cleared as levy sugar and enjoyed the rebate @ Rs. 54.00 instead of Rs. 9.60 was incorrect. This fact they should have also informed the department and by concealing all these facts they have made wilful misstatement and suppressed the fact with the intention to evade payment of duty. The show-cause notice issued under Rule 10 was also correct as the same was in force at the time of issue of show-cause notice."

(6) THE order of the Assistant Collector of central Excise, Saharanpur,was impugned by the appellants in the writ petition. It was, inter alia, contended on behalf of the appellants that the demand for Rs. 2,68,285.76 could not have been raised against the appellants in view of the prohibition contained in Rule 10; the demand based on an erroneously allowed proforma credit amounted to a short levy and such demand could be raised only within six months from the rele