Suppression of input source in excise records defeats limitation plea, sustains penalty, and supports statutory interest recovery.

Non-disclosure in excise documents of whether the inputs were imported or indigenous, where that fact determined the applicable duty rate, was treated as suppression of material facts with intent to evade duty. The limitation plea therefore failed and the demand was sustained on that ground. Deliberate suppression also justified penalty under Rule 173Q, though the Tribunal moderated the quantum on the facts and reduced it to Rs. 1,00,000. Interest was held recoverable under Section 11AB in accordance with the statute. The appeal succeeded only to the limited extent of penalty reduction, while the findings on limitation and interest were maintained.

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Issues: (i) whether the demand was barred by limitation on account of suppression of material facts; (ii) whether penalty under Rule 173Q was sustainable and, if so, to what extent; (iii) whether interest could be demanded under Section 11AB.

Issue (i): whether the demand was barred by limitation on account of suppression of material facts.

Analysis: The duty-paying documents and classification declaration did not disclose the source of the inputs, although the applicable rate of duty depended on whether the pipes and tubes were manufactured from imported or indigenous iron and steel. In these circumstances, the non-disclosure of the source of raw materials was treated as suppression of material facts with intent to evade duty.

Conclusion: The plea of limitation failed and the demand was upheld on this aspect.

Issue (ii): whether penalty under Rule 173Q was sustainable and, if so, to what extent.

Analysis: The omission to disclose the source of inputs in the gate passes and classification declaration showed deliberate suppression of the relevant fact affecting duty liability. The penalty was therefore justified, but the Tribunal took the overall facts and circumstances into account while considering the quantum.

Conclusion: Penalty was upheld, but reduced to Rs. 1,00,000.

Issue (iii): whether interest could be demanded under Section 11AB.

Analysis: A demand expressed under Section 11AB was not treated as decisive of the revenue's entitlement, since statutory interest follows the liability created by law and may be recovered at the rates applicable for the relevant periods.

Conclusion: Interest was held to be recoverable in accordance with the statute.

Final Conclusion: The appeal succeeded only to the limited extent of reduction in penalty, while the findings on limitation and liability to interest were sustained.

Ratio Decidendi: Where the source of inputs is material to the duty rate and is not disclosed in the relevant excise documents, such non-disclosure constitutes suppression of facts sufficient to defeat a limitation plea and sustain penalty, though the quantum may be moderated on the facts.

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