Extended limitation under excise law fails where valuation basis is disclosed and the dispute is revenue neutral.

The extended limitation period under the Central Excise Act was considered unavailable where the assessee had disclosed its valuation basis through correspondence, Chartered Accountant certificates, returns and cost sheets, showing that depreciation on plant and building was not included in cost of production under Rule 8 of the Central Excise Valuation Rules. On those facts, suppression with intent to evade duty was not established. The dispute was also treated as revenue neutral because any duty paid would have been available as credit to the interconnected unit, further negating intent to evade. As a result, the demand for duty, interest and penalty based on extended limitation was set aside, while the undisputed duty portion remained undisturbed.

---

---

Issues: Whether the extended period of limitation under the Central Excise Act, 1944 was invocable for the demand raised on the basis that depreciation had not been included in the cost of production under Rule 8 of the Central Excise (Valuation) Rules, 2000, and whether the demand was sustainable in view of disclosure and revenue neutrality.

Analysis: The assessee had earlier informed the department through correspondence and Chartered Accountant certificates that depreciation on plant and building was not being considered while computing cost of production. The record also showed that the assessee had disclosed the basis of valuation in its returns and supporting cost sheets. In these circumstances, the finding of suppression with intent to evade duty was not sustainable. The dispute was also revenue neutral because any duty paid would have been available as credit to the interconnected unit, which negatived the allegation of intent to evade. Since the essential precondition for invocation of the extended limitation period was absent, the consequential demand of interest and penalty could not survive.

Conclusion: The extended period of limitation was not invocable and the demand of Rs. 35,14,16,652/- with interest and penalty was set aside. The remaining duty amount, not challenged, was left undisturbed.

Final Conclusion: The appeal succeeded on limitation and related consequences, resulting in deletion of the major demand, while the undisputed duty payment remained upheld.

Ratio Decidendi: Where the assessee has disclosed the valuation basis to the department and the dispute is revenue neutral, the extended period of limitation cannot be invoked in the absence of suppression with intent to evade duty.

---