Bale-wise identity and lawful return of duty-paid goods must be proved; otherwise duty, confiscation, and extended limitation follow.

Failure to prove bale-wise identity and lawful return of alleged duty-paid goods justified duty demand and confiscation, because the documents did not establish that the seized fabrics were the same goods earlier cleared on payment of duty and the assessee's version shifted during investigation. Suppression of material facts and clandestine removal supported invocation of the extended limitation period under the proviso to section 11A(1) of the Central Excise Act, 1944, so the extended period was upheld. Although duty and confiscation were sustained, the penalty was reduced on the facts and circumstances.

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Issues: (i) Whether the assessee proved that the disputed bales were duty-paid goods returned from Coimbatore and therefore not liable to central excise duty, confiscation, and penalty; (ii) whether invocation of the extended period of limitation under the proviso to section 11A(1) of the Central Excise Act, 1944 was justified; (iii) whether the penalty deserved reduction.

Issue (i): Whether the assessee proved that the disputed bales were duty-paid goods returned from Coimbatore and therefore not liable to central excise duty, confiscation, and penalty.

Analysis: The assessee failed to establish a reliable co-relation between the goods allegedly cleared on duty payment and the goods found and cleared without duty. The supporting documents did not demonstrate bale-wise identification or return through the claimed transport chain, there was no inward entry or D3 intimation for receipt of returned goods, and the assessee's version changed during investigation. The materials relied on did not prove that the seized and cleared fabrics were the same goods earlier cleared on payment of duty.

Conclusion: The issue was decided against the assessee. The duty demand and confiscation were upheld.

Issue (ii): Whether invocation of the extended period of limitation under the proviso to section 11A(1) of the Central Excise Act, 1944 was justified.

Analysis: The record showed suppression of material facts and clandestine removal of goods without duty payment. The assessee had not disclosed the relevant information during investigation and had not complied with the prescribed procedure for return of duty-paid goods. These circumstances supported invocation of the extended limitation period.

Conclusion: The issue was decided against the assessee. The extended period of limitation was correctly invoked.

Issue (iii): Whether the penalty deserved reduction.

Analysis: Although the duty demand and confiscation were sustained, the overall facts and circumstances justified leniency on the quantum of penalty.

Conclusion: The issue was decided partly in favour of the assessee. The penalty was reduced.

Final Conclusion: The duty demand, confiscation, and limitation finding were sustained, but the monetary penalty was substantially reduced.

Ratio Decidendi: Where an assessee fails to prove bale-wise identity and lawful return of allegedly duty-paid goods, and the record shows suppression and clandestine removal, the extended limitation under section 11A and the consequent duty and confiscation orders can be sustained, though the penalty may be moderated on the facts.

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