Extended limitation and unnotified penalty in central excise fail without wilful suppression or a show cause proposal.

Extended limitation in central excise applies only where the department proves wilful suppression or deliberate concealment; regular ER-1 filings and departmental scrutiny without contemporaneous objection weighed against invoking the extended period, so the duty demand was held time-barred. A penalty under Section 11AC cannot be sustained if it was not proposed in the show cause notice; the adjudicating authority's equal penalty therefore fell outside the notice and was set aside. The document also states that the demand, interest and penalty were set aside, with relief in favour of the assessee on both limitation and penalty.

---

---

Issues: (i) Whether the demand of central excise duty for the period 2007-08 was barred by limitation as the extended period was invoked without the necessary ingredients; (ii) Whether the equal penalty under Section 11AC could be sustained when no such penalty was proposed in the show cause notice.

Issue (i): Whether the demand of central excise duty for the period 2007-08 was barred by limitation as the extended period was invoked without the necessary ingredients.

Analysis: The assessee had been regularly filing ER-1 returns, which were scrutinized by the department, and no objection regarding undervaluation was raised at the relevant time. The department failed to place material showing suppression of facts or any positive act to evade duty. For invoking the extended period, suppression must be wilful and deliberate.

Conclusion: The extended period was not invocable and the demand was barred by limitation in favour of the assessee.

Issue (ii): Whether the equal penalty under Section 11AC could be sustained when no such penalty was proposed in the show cause notice.

Analysis: The show cause notice did not propose penalty under Section 11AC, yet the adjudicating authority imposed equal penalty in the original order. Penalty not proposed in the notice cannot be sustained as it falls outside the scope of the notice.

Conclusion: The penalty under Section 11AC was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The demand, interest, and penalty were set aside and the appeal succeeded on limitation as well as on the penalty issue.

Ratio Decidendi: Extended limitation in central excise can be invoked only on proof of wilful suppression or deliberate concealment, and a penalty not proposed in the show cause notice cannot be imposed in adjudication.

---