Extended period and undervaluation fail where facts were disclosed to the department and finished goods were assessed on MRP basis.

Extended-period duty demand failed because the assessee had disclosed the selling pattern to the department, the facts were examined by officers, and suppression was not established; the demand was therefore barred by limitation. Alleged undervaluation of intermediate soap noodles also failed because the finished goods were cleared on MRP basis under Section 4A, and the record showed comparable market purchases by the buyer from independent suppliers at similar prices. On these facts, the valuation allegation was not sustainable and the impugned order was set aside with consequential relief.

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Issues: (i) whether the demand was barred by limitation as the show cause notice invoked the extended period on the basis of alleged suppression of facts; (ii) whether undervaluation of intermediate goods was sustainable when the finished goods were cleared on MRP basis under Section 4A of the Central Excise Act, 1944.

Issue (i): whether the demand was barred by limitation as the show cause notice invoked the extended period on the basis of alleged suppression of facts.

Analysis: The appellant had disclosed the selling pattern to the department by letter dated 9-1-2004, which was examined by the departmental officers and further referred for consideration. In these circumstances, the allegation of suppression was not made out. The notice issued later could not validly rest on the extended period when the relevant facts were already within the knowledge of the department.

Conclusion: The demand was barred by limitation and the extended period could not be invoked.

Issue (ii): whether undervaluation of intermediate goods was sustainable when the finished goods were cleared on MRP basis under Section 4A of the Central Excise Act, 1944.

Analysis: The disputed soap noodles were sold to an independent buyer at a lower price, but the finished goods were received and cleared on payment of duty on MRP basis. The record also showed that the buyer purchased similar goods from independent suppliers at comparable prices. In a situation where the finished product suffers duty on MRP basis, the alleged undervaluation of the intermediate product did not justify the demand on merits.

Conclusion: The allegation of undervaluation was not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: When the relevant facts are disclosed to and examined by the department, the extended period cannot be invoked for suppression, and undervaluation of an intermediate product is unsustainable where the finished product is assessed on MRP basis under Section 4A.

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