The question of penalty arises only if the department can sustain its demand under the first notice.

( 1 ) HEARD learned Counsel for the petitioner and Shri Amit Negi holding brief on behalf of Shri sudhir Harkauli.

( 2 ) THE petitioner is engaged in the manufacturing of Scientific instruments like Pressure Gauges, gauge testers, dial thermometers and process control instruments etc. , and the accessories in its factory at Sahibabad. A demand notice under Section 11a of the Central Excises and Salt Act, 1944 for the period from 1-10-1983 to 25-7-1985 was issued for Central Excise duty amounting to Rs. 3,21,198. 90. The petitioner raised objection to the said notice of demand alleging that there was no misrepresentation or suppression of the facts by the petitioner and the demand raised by the respondents was also time barred. The said contention of the petitioner was upheld by the Tribunal by its order dated 22-9-1995.

( 3 ) WHILE raising the demand the Department also issued notice under Rule 173q for imposing penalty of Rs. 3 lakhs in contravention of the Central Excise Rules, 1944. The Tribunal cancelled the demand notice on the ground of same being time barred, but still kept a sum of Rs. 3 lakhs to be paid by the petitioner.

( 4 ) LEARNED counsel for the petitioner submits that no demand can be proceeded with in the absence of any demand notice. For that purpose learned Counsel for the petitioner relied upon a decision of Supreme Court reported in 1995 (76) E. L. T. 497 (S. C.) Collector of Central Excise v. H. M. M. Limited wherein it was held by the Supreme Court that the question of penalty would arise only if the department is able to sustain its demand under the first notice.

( 5 ) IN that view of the matter, the writ petition succeeds and is allowed. The order passed by the tribunal dated 22-9-1995 sustaining imposition of penalty is set aside. The other portion of the order passed by the Tribunal will remain operative. There will be no order as to costs.

.