Extended limitation period cannot be invoked absent suppression where duty-paid status of market inputs was treated as accepted.

The extended period of limitation could not be invoked where the units had previously been licensed, later de-licensed at the Department's instance, and had already undergone licensing scrutiny. With the ship-breaking issue then pending before the Gujarat High Court and the Board's clarification treating market-purchased inputs, whether old or new, as duty paid for Notification No. 208/83-C.E., the Department could not establish suppression with intent to evade duty. As the goods used were a mixed lot and the notification itself assumed market inputs were duty paid, the duty demand was barred by limitation.

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Issues: Whether the extended period of limitation could be invoked for the duty demands in the facts of the case.

Analysis: The demand was raised against units that had earlier been licensed, were later de-licensed at the Department's instance, and had also faced prior licensing scrutiny. The controversy regarding whether ship breaking amounted to manufacture was pending before the Gujarat High Court, and the Board's clarification treated inputs purchased from the market, whether old or new, used or fresh, as duty paid for the purpose of Notification No. 208/83-C.E. The goods used by the appellants were a mixed lot, and the notification itself proceeded on the presumption that market inputs were duty paid. In these circumstances, the Department could not sustain an allegation of suppression with intent to evade duty so as to justify invocation of the extended period.

Conclusion: The extended period of limitation was not invocable and the demand was barred by limitation in favour of the appellants.

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