Extended limitation under excise law requires specific proof of suppression or fraud, and penalty cannot operate retrospectively.

Excise duty demand was held time-barred because the relevant facts were already known to visiting officers, the assessee had disclosed the manufacture process during inspection, and the record lacked any specific pleading or proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty; on that basis, the extended limitation period under the proviso to Section 11A(1) could not be invoked. Penalty under Section 11AC was also held unsustainable because that provision commenced only from 28 September 1996 and could not be applied retrospectively to an earlier duty period. The assessee therefore succeeded on both limitation and penalty.

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Issues: (i) Whether the demand of central excise duty was barred by limitation and the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944 could be invoked; (ii) Whether penalty under Section 11AC of the Central Excise Act, 1944 could be sustained for a duty period prior to the provision's commencement.

Issue (i): Whether the demand of central excise duty was barred by limitation and the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944 could be invoked.

Analysis: The duty demand related to a period ending long before the show cause notice. The relevant facts had already come to the knowledge of the visiting excise officers, and the assessee had disclosed the manufacture process at the time of inspection. The record did not show any specific allegation or proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. In the absence of such foundational averments and evidence, the extended limitation provision could not be applied.

Conclusion: The duty demand was time-barred and the extended period was not invocable, in favour of the assessee.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act, 1944 could be sustained for a duty period prior to the provision's commencement.

Analysis: The penalty provision came into force only from 28 September 1996, whereas the duty period in dispute was earlier. A penal provision of this nature could not be applied retrospectively in the absence of any legislative indication to that effect.

Conclusion: The penalty under Section 11AC could not be sustained, in favour of the assessee.

Final Conclusion: The demand and penalty were unsustainable, and the assessee succeeded on the substantive grounds decided.

Ratio Decidendi: The extended period under excise law requires specific pleading and proof of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty, and a penal provision cannot be applied retrospectively unless the statute clearly so provides.

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