Extended limitation cannot sustain duty demand where no suppression, misstatement or fraud is proved and a procedural lapse is condoned.

A duty demand based only on a procedural lapse in availing exemption could not be sustained by invoking the extended period of limitation. The assessee had followed the accepted clearance procedure, the Department raised no objection until a much later audit, and there was no finding of suppression, misstatement, fraud or deliberate evasion. On those facts, the exemption under Notification No. 78/90-CE remained available, and the procedural defect was treated as effectively condoned by departmental conduct. The larger-period demand was therefore time-barred and unsustainable, and the Revenue's appeal was rejected.

---

---

Issues: Whether the duty demand was barred by limitation in the absence of suppression, misstatement or fraud, and whether a mere procedural lapse in availing the exemption could sustain the demand.

Analysis: The demand was held to be time-barred because the assessee had followed the accepted clearance procedure and the Department had not objected to it until the audit raised an objection much later. There was no finding of suppression of material information, misstatement or fraud, and no deliberate evasion of duty. The exemption under Notification No. 78/90-CE was available, and the dispute arose only from a procedural lapse which had effectively been condoned by the Department's conduct. On these facts, invocation of the longer period and confirmation of duty for the extended period was not sustainable.

Conclusion: The demand for the larger period was not sustainable, and the Revenue's appeal was rejected.

Ratio Decidendi: In the absence of suppression, misstatement or fraud, a demand founded only on a condoned procedural lapse cannot be sustained by invoking the extended period of limitation.

---