Extended limitation and penalty fail where clearances were disclosed and no suppression or intent to evade duty was shown.

Clearances made under the ARE-3 procedure, with disclosure that the supplies were to EPCG licence holders and furnishing of re-warehousing certificates to the excise authorities, put the department on notice of the transaction. On those facts, fraud, collusion, or suppression could not be established, so the extended period of limitation was unavailable and the demand was confined to the normal period. For the same reason, penalty was not sustainable because the record did not show suppression of facts or intent to evade duty; the penal demand was set aside.

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Issues: (i) Whether the extended period of limitation could be invoked for recovery of duty in the facts of the case; (ii) Whether penalty was sustainable in the absence of suppression or intent to evade duty.

Issue (i): Whether the extended period of limitation could be invoked for recovery of duty in the facts of the case.

Analysis: The goods were cleared under ARE-3 procedure, and the assessee had disclosed in the relevant documents that the supplies were made to EPCG licence holders. The re-warehousing certificate was also furnished to the jurisdictional excise authorities. In such circumstances, the department had knowledge of the clearances and the nature of the transaction, so allegations of fraud, collusion, or suppression were not sustainable to justify invocation of the extended period.

Conclusion: The extended period of limitation was not available, and the demand was confined to the normal period.

Issue (ii): Whether penalty was sustainable in the absence of suppression or intent to evade duty.

Analysis: Since the clearances were disclosed to the department and the record did not show suppression with intent to evade duty, the essential ingredient for penalty was absent. The lapse was treated as an error in duty payment, not as a deliberate act attracting penal consequences.

Conclusion: Penalty was not sustainable and was set aside.

Final Conclusion: The appeal succeeded to the extent that the extended limitation and penalty were rejected, while the duty demand was restricted to the normal period.

Ratio Decidendi: Where the department is informed of the nature of the clearances and supporting documents disclose the transaction, extended limitation and penalty cannot be invoked absent suppression of facts or intent to evade duty.

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