Extended limitation for duty demand fails where facts were known and no wilful suppression or intent to evade is shown

Show cause notices issued beyond the normal limitation period could not be saved by the extended period under the proviso to Section 11A absent wilful suppression, misrepresentation, or intent to evade duty. The Court noted that the relevant facts were already within the Department's knowledge, the exemption and input controversy had remained unsettled, and the prevailing judicial position was favourable to the assessees at the material time. A failure to obtain a licence, by itself, did not establish lack of bona fides or justify extension of limitation. The notices were therefore time-barred and the duty demands based on the extended period could not stand.

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Issues: Whether the show cause notices were barred by limitation and whether the extended period under the proviso to Section 11A could be invoked on the ground of misrepresentation or lack of bona fides.

Analysis: The demand notices were issued beyond six months. The question, therefore, was whether the Department could justify the longer period by establishing misrepresentation, wilful suppression, or absence of bona fide conduct. The Court noted that the surrounding controversy on the exemption notification and the character of the inputs had remained unsettled for years and that the prevailing judicial position at the relevant time was favourable to the assessees. In that setting, the failure to take out a licence could not, by itself, establish want of bona fides or justify invocation of the extended limitation period. The Court also agreed with the view that the Department had knowledge of the relevant facts much earlier and had not acted promptly.

Conclusion: The show cause notices were time-barred and the extended period of limitation was not available to the Department.

Final Conclusion: The appeals succeeded on limitation and the duty demands based on the extended period could not be sustained.

Ratio Decidendi: Where the relevant facts are within the Department's knowledge and the record does not establish wilful suppression or intent to evade duty, the extended period of limitation cannot be invoked merely because the assessee did not accept the Department's view on exemption or licensing.

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