Extended limitation and manufacture test fail where activity was known to the department and no suppression was shown.

The extended period of limitation could not be invoked because the department was already aware of the respondents' activity, records had been taken during investigation, and there was no wilful misstatement, suppression of facts, or intent to evade duty. The respondents' bona fide belief that the activity did not amount to manufacture further negatived the statutory conditions for extended limitation. The duty demand also failed because the respondents did not themselves carry out the dyeing process; it was done by job workers, and they bought grey yarn in cone form and sold it in the same form after the intermediate process. The impugned order was sustained and the Revenue's appeal failed.

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Issues: (i) Whether the extended period of limitation under Section 11A(1) could be invoked on the facts of the case. (ii) Whether the respondents' activity amounted to manufacture so as to sustain the duty demand.

Issue (i): Whether the extended period of limitation under Section 11A(1) could be invoked on the facts of the case.

Analysis: The department was already aware of the respondents' activity and records were taken during investigation. The respondents were found to be acting under a bona fide belief that their activity did not amount to manufacture, and there was no material showing wilful misstatement, suppression of facts, or intent to evade duty. In such circumstances, the preconditions for invoking the extended period were not satisfied.

Conclusion: The extended period of limitation was not invocable.

Issue (ii): Whether the respondents' activity amounted to manufacture so as to sustain the duty demand.

Analysis: The respondents were not themselves undertaking the dyeing process; that work was done by job workers. They purchased grey yarn in cone form and sold the yarn in cone form after the intermediate process. The reasoning accepted that the case did not establish a manufacture-based liability on the respondents in the manner alleged by the Revenue.

Conclusion: The demand was not sustainable on the footing urged by the Revenue.

Final Conclusion: The impugned order was sustained and the Revenue's appeal failed.

Ratio Decidendi: Mere non-payment of duty or failure to register, without wilful suppression or intent to evade duty and where the department was already aware of the activity, does not justify invocation of the extended period of limitation under Section 11A(1).

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