Suppression and marketability in captive intermediate goods can justify extended limitation, but duty is curtailed by time bar and exemption changes.

Non-disclosure of captively used intermediate products in the classification list can amount to suppression of material facts, making the extended period of limitation available where duty is otherwise exigible. The note also records that marketability may be inferred from market presence and inter-factory movement of the goods. Duty exposure was nevertheless confined by limitation for part of the period, and demands were curtailed where the exemption regime had changed after rescission of the relevant notification. The demand relating to one intermediate product was directed to be recalculated on the recorded basis, and the penalty was reduced accordingly.

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Issues: (i) Whether the extended period of limitation could be invoked for demand of duty on intermediate products manufactured captively for use in exempt final products, and whether the goods were marketable. (ii) Whether the duty demand was sustainable for the full period and whether the penalty required interference.

Issue (i): Whether the extended period of limitation could be invoked for demand of duty on intermediate products manufactured captively for use in exempt final products, and whether the goods were marketable.

Analysis: The appellants had not disclosed the intermediate products in the classification list, which was treated as suppression of material facts. Their plea that disclosure was unnecessary was not accepted, especially since they had been manufacturing bulk drugs for several years and had already declared one intermediate product. On marketability, the evidence relied upon showed that the goods had market presence and movement between factories, and Pyrantal Citrate was also shown to be available in the market.

Conclusion: The extended period of limitation was held invocable and the plea of non-marketability failed.

Issue (ii): Whether the duty demand was sustainable for the full period and whether the penalty required interference.

Analysis: The demand for Pyrantal Citrate and Epoxide for the period prior to 18-08-1987 was held time-barred. The demand for March 1988 was found unsustainable because the exemption position changed when Notification No. 234/86-C.E. was rescinded on 01-03-1988. The demand on Disodium Pamoate was also set aside for fresh recalculation on the basis recorded in the order. In the circumstances, the penalty was reduced.

Conclusion: The duty demand was sustained only in part, the recalculation direction was issued for Disodium Pamoate, and the penalty was reduced.

Final Conclusion: The appeal succeeded in part: limitation was accepted only for a portion of the period, the demand was curtailed accordingly, and the penalty was modified downward.

Ratio Decidendi: Non-disclosure of intermediate products in the classification list can constitute suppression justifying the extended period of limitation, while duty cannot be sustained for periods rendered non-demandable by limitation or by the changed exemption regime.

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