Extended limitation cannot be invoked without suppression where clearances are disclosed and the dispute is revenue-neutral.

Notification No. 67/95-CE was unavailable for molasses captively consumed in manufacturing rectified spirit cleared at nil rate of duty, because the exemption applied only where the final product was dutiable; a later arrangement of paying an amount equivalent to 8% of the final product value did not cure the defect for the earlier period. However, the demand was time-barred since the clearances and exemption claim were disclosed in RT-12 returns, suppression or intent to evade duty was not established, and the dispute was revenue-neutral. On that basis, the extended period could not be invoked, and the demand, interest and penalties were set aside.

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Issues: (i) whether the appellant was entitled to exemption under Notification No. 67/95-CE for molasses captively consumed in the manufacture of rectified spirit cleared at nil rate of duty, and (ii) whether the demand was barred by limitation in the absence of suppression of facts and in a revenue-neutral situation.

Issue (i): whether the appellant was entitled to exemption under Notification No. 67/95-CE for molasses captively consumed in the manufacture of rectified spirit cleared at nil rate of duty

Analysis: Notification No. 67/95-CE exempts captively consumed goods only when the final product is dutiable and not exempt or chargeable to nil rate of duty. Here, molasses was used in the manufacture of rectified spirit, which was cleared at nil rate of duty. The subsequent payment of an amount equivalent to 8% of the value of the final product did not satisfy the notification for the period prior to 01/06/2001, because that arrangement was introduced only later by amendment. The exemption condition was therefore violated.

Conclusion: The appellant was not entitled to the exemption under Notification No. 67/95-CE on merits.

Issue (ii): whether the demand was barred by limitation in the absence of suppression of facts and in a revenue-neutral situation

Analysis: The relevant clearances were disclosed in RT-12 returns, including the availment of exemption on molasses and payment of 8% on rectified spirit. On that basis, suppression of facts with intent to evade duty was not established. The notice was issued nearly four years after the relevant period, and the facts disclosed to the department negatived invocation of the extended period. The situation was also revenue-neutral, since any duty paid would have been available as credit, leaving no incentive for concealment.

Conclusion: The demand was time-barred and the extended period could not be invoked.

Final Conclusion: Although the exemption claim failed on merits, the demand, interest, and penalties were set aside because the invocation of the extended period was unsustainable and the proceedings were hit by limitation.

Ratio Decidendi: For invoking the extended period, the revenue must establish suppression of facts or intent to evade duty; where the material facts are disclosed and the matter is revenue-neutral, a demand raised beyond the normal period is not sustainable.

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