Extended limitation cannot rest on suppression where the department already knew the facts and marketability remained uncertain.

The extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 could not be invoked because the assessee had disclosed the nature of the intermediate product and the department was already aware of the manufacturing process. Continuing uncertainty, reflected in shifting departmental views and circulars on the marketability of sugar syrup, negatived deliberate suppression of facts with intent to evade duty. On that basis, the demand could not survive on limitation, and the demand, penalty and consequential liability were set aside in favour of the assessee.

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Issues: Whether the demand of duty and penalty could be sustained by invoking the extended period of limitation on the basis of suppression of facts.

Analysis: The assessee had disclosed the nature of the intermediate product and the departmental records showed awareness of the process from an earlier point of time. The existence of shifting departmental views and successive circulars on the marketability of sugar syrup also showed that the issue was under confusion and could not be treated as a case of deliberate concealment. In such circumstances, the ingredients necessary to apply the proviso to Section 11A(1) of the Central Excise Act, 1944 were not established, and the demand could not survive on limitation.

Conclusion: The extended period was not invocable and the demand, penalty and consequential liability were rightly set aside in favour of the assessee.

Ratio Decidendi: Where the department is already aware of the material facts and the dispute reflects continuing uncertainty on marketability, the proviso to Section 11A(1) of the Central Excise Act, 1944 cannot be invoked in the absence of suppression of facts with intent to evade duty.

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