J. Chelameswar, C.J.

1. This is an appeal by the Revenue under Section 130 of the Customs Act, 1962 aggrieved by an order in Appeal No.Excise/840/04 on the file of the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore.

2. The respondent Company is carrying on the activity of manufacture of Synthetic Rutile and Ferric Chloride. During the years 1996-97, 1997-98 and 1998-99 the respondent Company cleared 1003.75 Metric Tons of Synthetic Rutile concentrate valued approximately at Rs.2.25 crores to Domestic Tariff Area (DTA) without payment of duty under the Central Excise Act which is now estimated at Rs.18,07,997/-. The respondent did so because they claimed the benefit of notification No.4/97 CE dated 1.3.1997. The said notification admittedly grants complete exemption of the duty payable under the provisions of the Central Excise Act read with the Central Excise Tariff Act to ores falling under Chapter 26, Tariff Items 2601 to 2617 of the Central Excise Tariff Act. The said claim of the respondent was initially accepted by the department.

3. However, by a show cause notice dated 8.7.1998 the respondent was called upon to explain as to why the duty of the central excise payable should not be recovered from the respondent. The said show cause notice is purportedly issued in exercise of the powers under Section 11A(1) of the Central Excise Act. Subsequently the notice was withdrawn by another communication dated 4.8.1998 and a fresh show cause notice dated 12.10.1998 was issued purporting to invoke the extended period of limitation provided under the proviso to Section 11A(1) of the said Act and also proposing to impose penalty under Section 11AC, etc. Eventually, after hearing the objections of the respondent, by order dated 7.6.2004 (marked as Annexure H) in the instant appeal, a final decision was taken not only to recover the excise duty on the product of the respondent cleared during the relevant period indicated in the said order along with interest and penalty also.

4. Aggrieved by the said decision, the respondent carried the matter in appeal to the Customs, Excise & Service Tax Appellate Tribunal. The Tribunal by the order under appeal dated 30th June, 2006 allowed the appeal of the respondent holding in substance that the extended period of limitation provided under the proviso to Section 11A(1) of the Central Excise Act could not have been invoked by the appellant in the facts and circumstances of the case. However, the Tribunal opined that the demand of tax prior to 12.10.1998 (the date of the show cause notice) has to be redetermined by the adjudicating authority whereas the demand for the remaining period was held to be illegal. Hence the present appeal.

5. Section 11A of the Central Excise Act provides for recovery of duties either not levied or not paid or short-levied or short-paid or erroneously refunded by the department. Such a recovery is permissible only after following the procedure prescribed under subsection (1) of Section 11A of the Act if the department issues a notice to the assessee within a period of six months (at the relevant point of time and now one year with effect from 12.5.2000) from the relevant date, varying upon the factor whether it is a case of non levy or short levy or refund, etc. However, the proviso to the said Section grants an enlarged period of limitation of five years in the various contingencies contemplated under the said proviso. Section 11A (1) of the Act and its proviso read as follows:

"11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-

(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods