Extended limitation barred for no suppression, while restaurant exemption did not cover dutiable cakes and pastry.

Regular maintenance of books, vouchers, menu cards and bills, without evidence of deliberate suppression, meant the extended period of limitation and penalty could not be invoked; the dispute was treated as one of interpretation and bona fide belief. The restaurant exemption applied to food preparations covered by the notification, but it did not extend to goods falling under the excluded tariff heading for bread, pastry, cakes and biscuits, which remained dutiable. The demand was therefore sustained only to the extent relatable to cakes and pastry for the normal period, after giving credit for the amount already deposited, and the balance demand was set aside.

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Issues: (i) Whether invocation of the extended period of limitation and penalty was justified on the allegation of suppression and evasion; (ii) Whether the demand was sustainable for cakes, pastry and biscuits in view of the exemption notification and tariff classification.

Issue (i): Whether invocation of the extended period of limitation and penalty was justified on the allegation of suppression and evasion.

Analysis: The appellant was running a restaurant for decades and maintained regular records, including books of account, vouchers, menu cards and bills. The demand was founded on an allegation of suppression, but no contumacious conduct or supporting evidence was brought on record. In these circumstances, the dispute was held to be one of interpretation and bona fide belief, and the ingredients required for invoking the extended period were not established.

Conclusion: The extended period of limitation and the consequential penalty were not sustainable.

Issue (ii): Whether the demand was sustainable for cakes, pastry and biscuits in view of the exemption notification and tariff classification.

Analysis: The exemption under the notification for food preparations made in hotels and restaurants was accepted for the general restaurant activity and for items not liable to duty. However, the notification did not extend to all goods indiscriminately, and items falling under the excluded tariff heading relating to bread, pastry, cakes and biscuits remained dutiable. On that basis, only the demand attributable to the taxable items for the normal period was upheld, with credit given for the amount already deposited.

Conclusion: The demand was confirmed only to the limited extent relatable to cakes and pastry, and the balance demand was set aside.

Final Conclusion: The appeal succeeded only in part, with the larger demand and penalty being annulled and only the quantified duty on the covered items being sustained.

Ratio Decidendi: Where the assessee maintains regular records and the department proves no deliberate suppression, the extended period cannot be invoked; exemption for restaurant-prepared food items does not automatically cover excluded tariff goods that remain dutiable.

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