Bona fide excisability dispute bars extended limitation and penalty where suppression or wilful evasion is not established.

Mere non-payment of central excise duty on a disputed activity, where the department itself had doubts and the assessee acted under a bona fide belief that the process did not amount to manufacture, did not amount to suppression or misrepresentation. The extended limitation period under the proviso to Section 11A(1) was therefore not attracted, and the show cause notice could operate only within the normal limitation period. For the same reason, the penalty lacked a legal foundation and was set aside. The demand was thus confined to the permissible period, while the time-barred portion and the penalty were deleted.

---

---

Issues: (i) Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act was attracted on the facts of the case. (ii) Whether the penalty imposed on the appellant was sustainable.

Issue (i): Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act was attracted on the facts of the case.

Analysis: The process of profile cutting had been the subject of departmental doubt, and the appellant's non-payment of duty was found to be based on a bona fide belief that the activity did not amount to manufacture. In these circumstances, the conduct could not be characterised as contumacious suppression or misrepresentation so as to justify invocation of the extended period.

Conclusion: The proviso to Section 11A(1) was not attracted and the show cause notice could operate only for the normal limitation period.

Issue (ii): Whether the penalty imposed on the appellant was sustainable.

Analysis: Once the case was held not to involve suppression or wilful evasion, the foundation for penalty disappeared. The bona fide nature of the dispute and the admitted uncertainty on excisability made the penalty unwarranted.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The demand was confined to the permissible limitation period, while the balance demand beyond that period and the penalty were set aside; the assessees succeeded only in part.

Ratio Decidendi: Mere non-payment of duty on a disputed activity, where departmental uncertainty exists and the assessee acts under a bona fide belief, does not by itself establish suppression or misrepresentation so as to attract the extended limitation period or penalty.

---