Duty demand on assumed trade sample clearances fails without evidence; extended limitation needs proof of suppression.

Central excise commentary notes that a duty demand for alleged clearance of trade samples cannot be sustained on assumptions, estimates, or extrapolation from a later period without corroborative evidence of actual clearances. It also states that the extended limitation period and penalty require clear material showing wilful misstatement or suppression of facts; mere non-payment is insufficient. Where the notice is unsupported by positive evidence and no deliberate evasion is established, the demand becomes time-barred and the penalty basis falls away.

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Issues: (i) Whether the demand of duty on alleged clearance of trade samples during November 1995 to May 1997 could be sustained on the basis of assumptions and without corroborative evidence. (ii) Whether the extended period of limitation and penalty were invocable on the allegations of wilful misstatement and suppression of facts.

Issue (i): Whether the demand of duty on alleged clearance of trade samples during November 1995 to May 1997 could be sustained on the basis of assumptions and without corroborative evidence.

Analysis: The record did not show any clear admission that samples were cleared duty free during the relevant period. The show cause notice also did not contain evidence of such clearances. The demand was worked out by applying the percentage of samples cleared during a subsequent period to the disputed period, which amounted only to an assumption. In fiscal adjudication, a demand of duty cannot rest on presumptions when the Revenue fails to produce positive evidence of clearances.

Conclusion: The duty demand was not sustainable and this issue was decided in favour of the assessee.

Issue (ii): Whether the extended period of limitation and penalty were invocable on the allegations of wilful misstatement and suppression of facts.

Analysis: The allegations in the notice were not supported by clear material showing a deliberate intent to evade duty. Mere non-payment, absent positive evidence of conscious suppression or wilful misstatement, was insufficient to invoke the extended period. Since the show cause notice itself was issued beyond the normal period, the demand was time-barred and the foundation for penalty also failed.

Conclusion: The extended period and penalty were not invocable and this issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside because the demand was unsupported by evidence and the ingredients for extended limitation and penalty were not established.

Ratio Decidendi: A duty demand and extended limitation under central excise law cannot be sustained on assumptions or estimates alone; the Revenue must establish clear evidence of liability and deliberate suppression or wilful misstatement.

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