Limitation under Central Excise Act: absence of wilful suppression defeated extended period and penalties fell with the time-barred demand.

A demand under the Central Excise Act was found to be time barred because the appellants had filed periodic returns and their records were available to departmental audit, so wilful suppression could not be established. On those facts, the extended limitation period under Section 11A was not available, and the show cause notice was beyond the permissible period. As the demand itself failed on limitation, the penalties imposed in the order could not be sustained and were set aside.

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Issues: Whether the demand was barred by limitation and whether the extended period under Section 11A of the Central Excise Act, 1944 could be invoked, with the penalties depending on the fate of the demand.

Analysis: The appellants had been filing periodic returns and their records had been subject to departmental audit. The record did not show that the relevant facts regarding free supply of inputs and amortisation were withheld from the department. In such circumstances, the finding of wilful suppression could not be sustained, and the extended limitation period was not available. The show cause notice was also held to be beyond the permissible period on the facts reflected in the departmental records relied upon in the notice. Since the demand itself was held to be time barred, the penalties imposed in the impugned order could not survive.

Conclusion: The demand was held to be barred by limitation, the invocation of the extended period failed, and the penalties were set aside.

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