Extended limitation for excise duty cannot stand where facts were already known and no suppression or intent to evade was proved.

The extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 cannot be sustained where the excisability of cigarettes drawn for quality tests was under bona fide dispute and the Department already knew the material facts through continuing correspondence and prior proceedings. The demand for the earlier period was based on estimates and assumptions rather than contemporaneous records, and the essential ingredients of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty were not established. On that basis, the CESTAT's setting aside of the demand was upheld.

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Issues: Whether the Revenue could validly invoke the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 on the basis of alleged suppression and intent to evade duty in relation to cigarettes drawn for quality tests.

Analysis: The dispute regarding duty on cigarettes drawn for testing had remained the subject of continuing correspondence and prior proceedings between the assessee and the Department. The relevant facts were within the Department's knowledge, the assessee had been communicating its position over time, and duty had been paid in respect of later periods after contest. The impugned demand for the earlier period was not founded on contemporaneous records but on estimates and assumptions. In these circumstances, the essential ingredients for invoking the extended period, namely fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty, were not established.

Conclusion: The proviso to Section 11A could not be invoked, and the order of the CESTAT setting aside the demand was in law and required no interference.

Ratio Decidendi: Where the excisability of goods is under bona fide dispute and the Department is already aware of the material facts through continuous correspondence and prior proceedings, the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 cannot be sustained in the absence of proven suppression or intent to evade duty.

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