Extended limitation for job-work procedure lapses rejected where no suppression or duty evasion was shown.

The extended period of limitation could not be invoked where the dispute arose from non-compliance with job-work procedure, including direct supply of inputs to the job worker and credit taken on such inputs, because the record did not show duty evasion on the finished goods. The lapse was confined to procedural irregularity, and earlier departmental knowledge of similar issues negatived any allegation of suppression or intent to evade duty. On that basis, the demand, interest and penalty were set aside in favour of the assessee.

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Issues: Whether the demand, interest and penalty could be sustained by invoking the extended period on the ground that the assessee had not followed the prescribed job-work procedure and had taken credit in relation to inputs supplied directly to the job worker's premises.

Analysis: The goods were manufactured and cleared on job-work basis, but the assessee had not obtained the requisite permission for direct supply of inputs to the job worker, availment of credit on such inputs, and clearance of finished goods from the job worker's premises. The record did not establish any duty evasion on the finished goods, and the lapse was confined to non-compliance with procedure. As the department had already noticed similar irregularities earlier, the subsequent notice could not validly invoke the extended period on the footing of suppression or intent to evade duty.

Conclusion: The invocation of the extended period was unsustainable, and the demand, interest and penalty were set aside in favour of the assessee.

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