Full disclosure in declarations and returns bars extended limitation; unsustainable excise demand also knocks out penalty.

Full disclosure of the manufacturing process, nature of the yarn, exemption claim and monthly duty position in declarations and returns defeated invocation of the extended period, because the record already enabled the department to assess the goods and the absence of a brand name was immaterial; the demand was therefore barred by limitation. On merits, the demand also failed on the correct cum-duty computation with credit-related adjustments, and once the substantive levy was unsustainable the consequential penalty could not survive.

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Issues: (i) Whether the extended period of limitation could be invoked on the basis of alleged suppression of facts with intent to evade duty; (ii) whether the demand and consequential penalty could be sustained on merits.

Issue (i): Whether the extended period of limitation could be invoked on the basis of alleged suppression of facts with intent to evade duty.

Analysis: The appellant had disclosed the nature of the yarn, the processing undertaken, and the claim to exemption in the declaration filed under the excise procedure, and monthly returns were also filed showing the duty position. The record showed that the department had sufficient material to identify the goods and the applicable assessment from the declarations already filed. Non-mention of a brand name in the returns was treated as immaterial for assessment. In these circumstances, the allegation of wilful suppression with intent to evade duty was not sustainable, and the reasoning supporting invocation of the extended period could not stand.

Conclusion: The extended period was not invocable and the demand was barred by limitation.

Issue (ii): Whether the demand and consequential penalty could be sustained on merits.

Analysis: The earlier proceedings had already resulted in a finding of excess payment after allowing the appropriate duty computation, and the demand in the present proceedings was also substantially unsupported when valuation was taken on a cum-duty basis and credit-related adjustments were considered. The unsustainability of the demand on the correct method of computation indicated that the assessee could not be said to have adopted the method with intent to evade duty. Once the substantive demand failed, the penalty could not survive.

Conclusion: The demand was not sustainable on merits and the penalty also failed.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the assessee has made full disclosure of the relevant manufacturing and assessment particulars in the prescribed declarations and returns, the extended period under excise law cannot be invoked absent material suppression with intent to evade duty; once the demand fails, the penalty falls with it.

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