Suppression of material facts justified extended limitation and penalty for clandestine removal under excise law.

Clearing defective automobile tyres under an ADV label without disclosing that no ADV tyres were manufactured amounted to suppression of a material fact with intent to evade duty. On that basis, the extended limitation period was available and the duty demand was not time-barred. The same concealment and clandestine removal also supported penal liability under the Central Excise Rules, and the penalty was treated as sustainable because it fell within the statutory ceiling and was modest in relation to the duty evaded and the value of the goods.

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Issues: (i) whether the demand of duty was barred by limitation or the extended period could be invoked on the basis of suppression of material facts and intent to evade duty; (ii) whether the penalty imposed under the Central Excise Rules was sustainable and reasonable.

Issue (i): whether the demand of duty was barred by limitation or the extended period could be invoked on the basis of suppression of material facts and intent to evade duty

Analysis: The goods were cleared as ADV tyres without payment of duty, though the appellants admitted that they were not manufacturing any ADV tyres and were clearing defective automobile tyres under the ADV label. The disclosure made to the department did not reveal this crucial fact, and prior departmental awareness of earlier clearances did not amount to constructive knowledge for the later period. The record showed suppression of a material fact coupled with intent to evade duty, attracting the proviso to the limitation provision.

Conclusion: The extended period of limitation was rightly invoked and the demand was not time-barred.

Issue (ii): whether the penalty imposed under the Central Excise Rules was sustainable and reasonable

Analysis: Clandestine removal necessarily involved breach of the excise rules, and the finding of intent to evade duty supported penal liability. The penalty imposed was well within the statutory ceiling under the relevant rule and was modest compared with the duty evaded and the value of the goods.

Conclusion: The penalty was validly imposed and was reasonable in amount.

Final Conclusion: The demand and penalty were both sustained, leaving the appellants without relief.

Ratio Decidendi: Suppression of the material fact that excisable goods were being cleared under an exempt description without duty payment justifies invocation of the extended limitation period and supports penal consequences for clandestine removal with intent to evade duty.

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