Extended limitation in excise survives for procedural contravention with intent to evade, but later penalty provisions cannot apply retrospectively.

Contravention of central excise procedural requirements, coupled with intent to evade duty, justified invocation of the extended limitation period and sustained the duty demand. However, interest under Section 11AB and mandatory penalty under Section 11AC could not be imposed for a period before those provisions came into force, so both were set aside. Penalty under Rule 173Q was also deleted because the lower orders did not record the necessary finding to support it, despite the alleged non-accountal of dutiable waste and scrap. The result was sustenance of the duty demand, with deletion of interest and penalties.

---

---

Issues: (i) Whether the demand of duty was barred by limitation and whether the extended period of limitation could be invoked on the ground of contravention of rules with intent to evade duty; (ii) Whether interest under Section 11AB of the Central Excise Act, 1944 and mandatory penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for a period prior to their commencement; (iii) Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Issue (i): Whether the demand of duty was barred by limitation and whether the extended period of limitation could be invoked on the ground of contravention of rules with intent to evade duty.

Analysis: The waste and scrap cleared during the relevant period had become dutiable after the rescission of the earlier exemption notification. The finding recorded below that the assessee had contravened Rule 173B by not filing a fresh classification list after the new notification was issued was not challenged. Such contravention, when accompanied by intent to evade duty, constitutes a sufficient basis for invoking the extended period of limitation. The plea based on approved classification list, Modvat credit, and absence of suppression did not displace that finding.

Conclusion: The demand was not barred by limitation and the extended period was validly invoked, against the assessee.

Issue (ii): Whether interest under Section 11AB of the Central Excise Act, 1944 and mandatory penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for a period prior to their commencement.

Analysis: The demand related to a period when Sections 11AB and 11AC were not in force. Provisions that were not operative during the relevant period could not be applied to levy interest or impose mandatory penalty for that past period.

Conclusion: The interest under Section 11AB and the penalty under Section 11AC were unsustainable and were set aside, in favour of the assessee.

Issue (iii): Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Analysis: The assessee had admittedly cleared dutiable waste and scrap without payment of duty and without accounting for production and clearance in the statutory records. Such non-accountal can justify penalty under Rule 173Q, but the orders below did not record the necessary finding to support that penalty.

Conclusion: The penalty under Rule 173Q was set aside, in favour of the assessee.

Final Conclusion: The demand of duty was sustained, but the interest and penalties were deleted, resulting in only partial success for the assessee.

Ratio Decidendi: Contravention of central excise procedural requirements with intent to evade duty justifies invocation of the extended limitation period, but fiscal penal provisions cannot be applied retrospectively to a period when they were not in force.

---