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Issues: Whether the demand of central excise duty and the connected penalty were sustainable, particularly on the ground that the extended period of limitation could be invoked on an allegation of suppression of facts with intent to evade duty.
Analysis: The demand arose from fire damage to goods in the factory. The record showed that part of the damaged goods had already been cleared on payment of duty, some goods were manufactured on job work basis for which duty liability was not on the assessee, and duty on the remaining item had already been paid. The assessee had not reported the fire accident or sought remission, but the omission was found insufficient to establish suppression with intent to evade duty, especially when no remission was being claimed and no duty benefit could have been gained by reporting the accident. On these facts, the precondition for applying the larger limitation period under the first proviso to Section 11A(1) was not satisfied.
Conclusion: The demand was barred by limitation and was unsustainable; the penalty also failed and stood set aside in favour of the assessee.
Ratio Decidendi: Mere non-reporting of a fire accident does not justify invocation of the extended period of limitation unless suppression of facts with intent to evade duty is affirmatively established.
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