Suppression through dummy unit clearances justified extended limitation and penalty, though the penalty was reduced on the facts.

Clearances routed through a purported dummy unit, coupled with non-payment of duty on the proper assessable value and failure to file required declarations, were treated as suppression with intent to evade duty. On that basis, invocation of the extended limitation period and imposition of penalty under the Central Excise Rules were held to be legally sustainable. The facts were nevertheless considered relevant to calibrate the penalty, and the penalty amount was reduced while the liability in principle was maintained.

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Issues: Whether the imposition of penalty under the Central Excise Rules was justified in view of the finding of suppression and evasion, and whether the quantum of penalty required reduction.

Analysis: The liability arose from clearances effected through a purported dummy unit, with duty not paid on the appropriate assessable value and statutory declarations not filed as required. The departmental objections had been raised contemporaneously in the RT 12 returns, and the conduct was treated as showing an intention to evade duty. On that basis, invocation of the extended period and the imposition of penalty were held to be legally sustainable. At the same time, the facts and circumstances were considered relevant for calibrating the measure of penalty.

Conclusion: Penalty was upheld in principle, but its amount was reduced to Rs. 2 lakhs.

Final Conclusion: The duty demand and penal consequence were sustained on the finding of deliberate evasion, subject only to reduction of the penalty amount.

Ratio Decidendi: Where the assessee adopts a device to clear goods through a non-existent or dummy unit and the conduct discloses suppression and intent to evade duty, the extended period is invocable and penalty is justified, though the quantum may be moderated on the facts.

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