Limitation for disclosed excise clearances applied because no clandestine removal was established, and penalty was unwarranted.

Where goods were disclosed in classification lists and the Department had been directed to verify excisability, the removals were not treated as clandestine, so the shorter limitation for non-suppression cases applied and the demand beyond that period was time-barred. The alleged procedural lapses in accountal and gate passes were treated as minor, and no sufficient basis for penalty was found because disclosure had been made and clandestine conduct was not established. The remaining issues on non-excisability and consequential dutiability required fresh consideration by the Collector, with due regard to the limitation finding.

---

---

Issues: (i) Whether the demand relating to goods cleared under Tariff Item 68 was barred by limitation under Rule 10(1) of the Central Excise Rules, 1944, instead of being governed by Rule 9(2) of those Rules; (ii) Whether the alleged contraventions and the alleged removal of goods justified the penalty imposed.

Issue (i): Whether the demand relating to goods cleared under Tariff Item 68 was barred by limitation under Rule 10(1) of the Central Excise Rules, 1944, instead of being governed by Rule 9(2) of those Rules.

Analysis: The classification lists had disclosed the goods later brought under Tariff Item 68, and the approving authority had directed departmental verification of excisability. No further direction was issued thereafter. In that background, the removals could not be treated as clandestine, and the omission to pursue the matter rested with the Department. As there was no clandestine removal, the shorter limitation provision under Rule 10(1) applied.

Conclusion: The demand for the period beyond the limitation prescribed under Rule 10(1) was time-barred, and Rule 9(2) was inapplicable.

Issue (ii): Whether the alleged contraventions and the alleged removal of goods justified the penalty imposed.

Analysis: The record showed disclosure of relevant particulars to the Department, and the procedural irregularities regarding accountal and gate passes were treated as minor. Since the Department had been put on notice and no clandestine conduct was established, there was no sufficient basis for penal action.

Conclusion: The penalty was not justified and was set aside in full.

Issue (iii): Whether the Collector was required to consider the appellants' submissions on the non-excisability and consequential dutiability of the remaining goods.

Analysis: Detailed submissions on non-excisability had been made, but no finding had been recorded on them. The matter therefore required reconsideration by the Collector, with due regard to the time-bar ruling.

Conclusion: The matter was remitted for consideration of excisability and consequential dutiability of the remaining goods.

Final Conclusion: The decision substantially relieved the assessee on limitation and penalty, while leaving the remaining excisability questions for fresh consideration by the Collector.

Ratio Decidendi: Where the assessee has disclosed the relevant goods to the Department and no clandestine removal is established, the demand cannot be treated as arising from suppression, and the limitation provision applicable to non-clandestine demands must govern.

---