Excise exemption claims fail where declarations and gate pass particulars misstate composition, source, and support extended limitation.

Declarations made to obtain excise exemption must accord with the actual composition and source of the goods. The record supported a finding that the yarn supplied to DGS&D was manufactured by the appellants, not procured from the market. The claimed exemption under Notification No. 224/79 failed because the yarn did not satisfy the prescribed composition limit of not more than 1/6th non-cellulosic fibre, and the lower-duty classification was rejected. Incorrect gate pass particulars and inconsistent declarations were treated as suppression and misstatement, so the extended limitation period was upheld and the duty demand and penalty sustained.

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Issues: (i) whether the yarn supplied to DGS&D was manufactured by the appellants themselves or procured from the market, (ii) whether the goods were entitled to exemption under Notification No. 224/79 and fell within the lower-duty tariff item, and (iii) whether the demand was barred by limitation.

Issue (i): whether the yarn supplied to DGS&D was manufactured by the appellants themselves or procured from the market.

Analysis: The record supported the finding that the appellants had declared supply of stores of their own make, and the DGS&D correspondence and pre-inspection material indicated that the goods offered for inspection were treated as appellant-manufactured goods. The explanation based on later expert opinion did not establish lack of capacity during the relevant period, and the evidence did not sustain the claim that the supplies were merely market purchases.

Conclusion: The finding that the goods were manufactured by the appellants was upheld.

Issue (ii): whether the goods were entitled to exemption under Notification No. 224/79 and fell within the lower-duty tariff item.

Analysis: The exemption was available only to yarn containing not more than 1/6th by weight of non-cellulosic fibre, whereas the contract specifications and the tested composition showed yarn of 70% wool and 30% nylon. On that basis, the declaration in the gate passes did not match the contractual composition, and the classification taken by the appellants was not accepted.

Conclusion: The claim to exemption and the lower tariff classification was rejected.

Issue (iii): whether the demand was barred by limitation.

Analysis: Since the appellants' declarations and gate pass particulars were found to be incorrect and the material disclosed suppression and misstatement, the invocation of the extended period was sustained.

Conclusion: The plea of limitation failed.

Final Conclusion: The duty demand and penalty were sustained, and no interference was warranted with the adjudication order.

Ratio Decidendi: Where declarations made to secure excise exemption are found inconsistent with the contractual description and the evidence supports suppression or misstatement, the exemption claim, limitation objection, and challenge to the demand will fail.

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