Extended limitation cannot be invoked where departmental permission was granted with full knowledge of the relevant facts.

Where the department permitted removal of inputs to a job worker on the assessee's disclosures, and correspondence showed full awareness that the final product attracted nil duty, the demand could not later be sustained on the plea that permission had been granted by mistake. In these circumstances, invocation of the extended period of limitation was not justified, and the demand was treated as time-barred. The commentary states that the demand and penalty could not be sustained once the Revenue had acted with knowledge of the relevant facts.

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Issues: Whether the duty demand and penalty could be sustained when the department had granted permission to send inputs to a job worker with full knowledge of the final product's nil duty position, and whether the longer period of limitation was invocable.

Analysis: The permission to remove inputs to the job worker and receive the processed goods back was granted on the basis of the information supplied by the assessee, and the correspondence showed that the Revenue was aware that the final product attracted nil tariff rate. In such circumstances, the department could not later contend that the permission had been granted by mistake and invoke the extended period of limitation. The demand was therefore examined as time-barred.

Conclusion: The demand was barred by limitation and could not be sustained. The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: When the department grants permission and acts with full knowledge of the relevant facts, it cannot subsequently invoke the extended period of limitation on the plea of mistake to sustain a demand.

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