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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act could be invoked and the demand sustained for the entire disputed period, in view of the assessee's bona fide belief based on departmental circulars.
Analysis: The assessee had relied on an earlier Board circular favourable to it, and the later circular taking a contrary view was issued only on 07-03-1990. On that basis, the assessee entertained a bona fide belief that the process of blending and repacking did not amount to manufacture. Once such bona fide belief was established, the extended period could not be invoked for the earlier clearances. The later circular could not be applied retrospectively to fasten liability for the prior period. Only the clearances made after 07-03-1990 were treated as exigible.
Conclusion: The extended period of limitation was not available to the Revenue for the bulk of the demand, and duty liability survived only for the period from 07-03-1990 onwards, which was required to be quantified by the Original Authority.
Final Conclusion: The appeal succeeded substantially for the assessee on limitation, with duty liability confined to the post-circular period.
Ratio Decidendi: A demand cannot be sustained for the period prior to a contrary departmental circular where the assessee acted under a bona fide belief founded on an earlier favourable circular, and such later circular operates only prospectively.
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