Wilful suppression in undervaluation cases can sustain extended limitation and penalty when default is disclosed only after audit.

Undervaluation of goods cleared to the assessee's own unit, detected from its records only on audit, was treated as suppression when the default was not voluntarily disclosed to the department. Payment of short duty and interest after audit did not cure the original omission, and repeated undervaluation supported an inference of wilful suppression and intent to evade duty. On that basis, invocation of the extended limitation period and penalty under Central Excise law was upheld, and the challenge to the duty-related penalty failed.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable on the ground of suppression of facts and intent to evade duty, notwithstanding payment of duty and interest after audit.

Analysis: The undervaluation of goods cleared to the appellant's own unit was not treated as a mere accounting irregularity. The payment of the short duty only after audit did not erase the original default, and the fact that the relevant information was available in the appellant's own records did not negate suppression when it was not voluntarily disclosed to the department. The finding of repeated undervaluation also supported the inference of wilful suppression and mens rea, justifying invocation of the extended period under Section 11A and the penal provision under Section 11AC.

Conclusion: The penalty was correctly imposed and the challenge to it failed.

Final Conclusion: The appeal was rejected, and the impugned order sustaining duty-related penalty was upheld.

Ratio Decidendi: Where undervaluation and short payment are detected from the assessee's own records only on audit verification and the assessee does not voluntarily disclose the default, wilful suppression and intent to evade duty may be inferred, warranting the extended period and penalty under the Central Excise law.

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