Extended limitation in excise demands fails without proof of clandestine removal or intent to evade duty.

Extended limitation under excise law could not be invoked where the assessee had informed the revenue that goods were not available after manufacturing stopped, and the department failed to establish the manner of alleged clandestine removal or any intent to evade duty. In the absence of material showing suppression with mens rea, the longer limitation period was unavailable. The consequential demand for duty, interest and penalty therefore could not survive and was set aside.

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Issues: Whether the demand of duty, interest and penalty was barred by limitation and whether the extended period under the excise law could be invoked on the facts disclosed by the assessee.

Analysis: The goods were found to be not available in the factory after the manufacturing activity had stopped, and the assessee had intimated the revenue about the non-availability of the goods. On those facts, the allegation of clandestine removal required proof of the manner of removal and an intention to evade duty. The record did not show any effective inquiry by the department to establish such removal or mens rea before invoking the extended limitation period. In the absence of material showing suppression with intent to evade duty, the longer period of limitation could not be applied, and the consequential demand, interest and penalty could not survive.

Conclusion: The extended period of limitation was not available to the revenue, and the demand, interest and penalty were rightly set aside.

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