Extended limitation and penalty fail where facts were disclosed and no intent to evade duty is shown.

Extended limitation under central excise law could not be invoked absent suppression of facts or wilful misstatement with intent to evade duty, because the assessees had disclosed both units and filed classification lists and returns, and the department was already aware of the relevant facts; the demand was therefore confined to the normal period and barred for the longer period. Penalty was also not justified, as the same record negatived deliberate contravention and the approvals of classification lists undermined any penal foundation. The exemption scheme's requirement to club clearances affected the duty calculation, but did not by itself support penalty on these facts.

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Issues: (i) whether the demand for duty could be sustained by invoking the extended period of limitation in the absence of suppression or wilful misstatement; (ii) whether penalty was imposable in the facts and circumstances of the case.

Issue (i): whether the demand for duty could be sustained by invoking the extended period of limitation in the absence of suppression or wilful misstatement.

Analysis: The material on record showed that the assessees had disclosed the existence of both units and had been filing classification lists and returns. The relevant facts were within the department's knowledge, and the record did not establish suppression of facts or wilful misstatement with intent to evade duty. In such circumstances, the longer period could not be applied, and the demand had to be confined to the normal period.

Conclusion: The demand was barred by limitation and was not sustainable.

Issue (ii): whether penalty was imposable in the facts and circumstances of the case.

Analysis: Penalty under the relevant central excise provisions required a finding of deliberate contravention or conduct attracting penal consequences. Since the same facts negatived suppression and any intent to evade duty, and the classification lists had repeatedly been approved by the department, the foundation for penalty was absent. The majority also noted that the exemption scheme required clubbing of clearances for the purpose of determining the applicable duty rate, but this did not justify penalty on the facts found.

Conclusion: Penalty was not imposable.

Final Conclusion: The appeal succeeded on limitation and penalty, and the assessee obtained complete relief from the demand and penalty as sustained in the impugned order.

Ratio Decidendi: Where the department fails to establish suppression of facts or wilful misstatement with intent to evade duty, the extended period of limitation cannot be invoked, and penalty based on the same alleged conduct is not justified.

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