Undisclosed material and absence of suppression bar extended limitation; matter remanded for fresh adjudication on merits.

Reliance on an undisclosed Assistant Commissioner's report and an incomplete comparison of the assessee's manufacturing process vitiated the de novo adjudication, so the matter required fresh consideration on merits after disclosure of the relied-upon material and a proper opportunity of hearing. The extended period of limitation could not be invoked because the denaturing process was carried out as a statutory requirement under State Excise supervision and the department was already aware of the relevant facts; non-disclosure of that step did not amount to suppression with intent to evade duty. The demand, if any, was therefore confined to the normal period.

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Issues: (i) Whether the de novo adjudication was vitiated by non-supply of the Assistant Commissioner's report and inadequate comparison of the manufacturing process, warranting remand for fresh consideration on merits; (ii) Whether the extended period of limitation could be invoked in the absence of suppression or misstatement by the assessee.

Issue (i): Whether the de novo adjudication was vitiated by non-supply of the Assistant Commissioner's report and inadequate comparison of the manufacturing process, warranting remand for fresh consideration on merits.

Analysis: The impugned order relied upon a report that had not been furnished to the assessee, and the comparison of the assessee's manufacturing process with the processes considered in earlier decisions was not shown to have been carried out with adequate fairness or completeness. The earlier remand had required a fresh examination in the light of the Tribunal's prior view on transient emergence and marketability of denatured ethyl alcohol. In these circumstances, the matter required re-examination after disclosure of the relied-upon material and after giving a proper opportunity to meet the case on merits.

Conclusion: The matter was rightly remanded for fresh adjudication on merits after supplying the relied-upon report and affording a reasonable opportunity of hearing to the assessee.

Issue (ii): Whether the extended period of limitation could be invoked in the absence of suppression or misstatement by the assessee.

Analysis: The denaturing process was a statutory requirement carried out under the supervision of State Excise authorities, and the department was aware that the assessee was manufacturing cosmetics and using denatured ethyl alcohol in the ordinary course of production. On these facts, non-disclosure of the depuration or denaturing step could not, by itself, amount to suppression with intent to evade duty. Where the surrounding facts were known to both sides and similar assessees were not paying duty on the intermediate product, invocation of the extended period was not justified.

Conclusion: The extended period of limitation was not available to the department, and the demand, if any, was confined to the normal period.

Final Conclusion: The appeal succeeded to the extent that the demand could not be sustained on the extended period and the merits had to be re-decided after a fresh and fair adjudication, leaving the substantive duty issue open for reconsideration.

Ratio Decidendi: Reliance on undisclosed material and failure to fairly compare the manufacturing process justify remand for fresh adjudication, and known statutory or departmental facts cannot constitute suppression so as to invoke the extended period of limitation.

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