Wilful suppression requirement defeats extended excise limitation where audited job-work records and free-supplied material values were fully accounted for.

Extended limitation for central excise recovery requires wilful suppression or a deliberate act to evade duty. Where free-supplied materials were properly accounted for, their value was included by the principal manufacturer in the assessable value of final goods, and the job-worker's records were periodically audited, the article identifies a revenue-neutral situation with no deliberate non-disclosure. It states that the condition for invoking the extended limitation period was therefore absent, making the consequential demand, interest and penalty unsustainable.

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Issues: Whether the extended period of limitation for recovery of central excise duty and the consequential penalty were sustainable where the assessee's job-work activities and free-supplied materials were subject to departmental audit and the principal manufacturer had included their value in the assessable value of final goods.

Analysis: The free-supplied materials were accounted for, and their value was included by the principal manufacturer while discharging duty on the final products. The assessee's records and activities had also been periodically audited. In this revenue-neutral situation, there was no deliberate non-disclosure or positive act to evade duty. Consequently, the prerequisite of wilful suppression for invoking the extended limitation period was not established.

Conclusion: The extended-period demand, interest and penalty were unsustainable, in favour of the assessee.

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