Limitation for interest and penalty notices fails absent suppression, misstatement, fraud or collusion; demand cannot survive.

A show-cause notice for recovery of interest and proposal of penalty was held time barred because it was issued after the relevant period and contained no allegation of suppression, misstatement, fraud or collusion. The Tribunal applied the settled principle that interest may arise on delayed duty payment, but limitation remained decisive; once the notice failed on limitation, the foundation for penalty also fell away. The interest demand and penalty were therefore not sustainable, and the dispute was resolved in favour of the assessee on limitation grounds.

---

---

Issues: Whether the show-cause notice issued for recovery of interest and proposal of penalty for the relevant period was barred by limitation and, if so, whether penalty could still be sustained.

Analysis: The period involved was April 2004 to September 2005, and the show-cause notice was issued on 8-12-2006. The demand for interest was examined in the light of the settled principle that interest is payable on delayed duty payment, but the decisive question was whether the notice itself was within time. As there was no allegation in the notice of suppression of facts, misstatement, fraud or collusion, the Tribunal held the notice to be time barred. Once the notice failed on limitation, the basis for imposing penalty also disappeared.

Conclusion: The show-cause notice was held to be time barred and the penalty was not sustainable.

Final Conclusion: The assessee's appeal succeeded and the Revenue's appeal failed, with the result that the interest demand and the penalty dispute were resolved in favour of the assessee on the ground of limitation.

Ratio Decidendi: In the absence of allegations of suppression, misstatement, fraud or collusion, a show-cause notice issued beyond the prescribed limitation period cannot sustain recovery of interest or imposition of penalty.

---