Extended limitation under central excise rejected where processor lacked knowledge of merchant manufacturers' under-valuation and suppression.

Extended period of limitation could not be invoked for the central excise demand because the under-valuation was attributable to merchant manufacturers and there was no evidence that the processor knew of, or participated in, the suppression. The price declarations were filed on the basis of grey bills supplied by the merchant manufacturers, and the processor had no reason to doubt their correctness. As there was no material showing fraud, collusion, wilful misstatement, or suppression of facts by the processor, the conditions for the extended limitation period were not satisfied. The demand was therefore barred by limitation and the assessee succeeded.

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Issues: Whether the extended period of limitation could be invoked for confirming the central excise demand against the processor when the under-valuation was attributable to merchant manufacturers and there was no evidence that the processor had knowledge of, or ated in, the suppression.

Analysis: The processor was required to discharge duty on the processed fabrics, but the demand had been raised beyond the normal period. The statements of the managing director and manager indicated that the price declarations were filed on the basis of grey bills supplied by the merchant manufacturers and that the processor had no reason to doubt their correctness. There was no material to show that the appellants knew of the under-valuation or were party to any fraud, collusion, wilful misstatement, or suppression of facts. In the absence of evidence linking the appellants to the wrongful valuation adopted by the merchant manufacturers, the ingredients necessary for the extended limitation period were not established.

Conclusion: The extended period of limitation was not invocable and the demand was barred by limitation. The appeal was allowed in favour of the assessee.

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