Burden of proof and extended limitation defeated the duty demand where suppression was not substantiated.

The department could not sustain the duty demand for alleged breach of Notification No. 203/92-Cus. because it failed to establish the factual basis that Modvat credit had been availed. The notice did not clearly admit such availment, and no material was produced to show suppression of facts for invoking the extended limitation period under the Customs Act. As the burden lay on the department to prove both the contravention and the factual foundation for extended limitation, the demand failed and the assessee succeeded.

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Issues: Whether the demand of duty was sustainable when the department alleged breach of Notification No. 203/92-Cus. on the ground that Modvat credit had been taken, and whether invocation of the extended period under Section 28(1) of the Customs Act, 1962 was justified.

Analysis: The notice alleged contravention of the notification condition relating to non-availment of Modvat credit, but the reply did not clearly admit such availment. The burden lay on the department to establish the factual foundation for the demand. As the notice was issued after clearance of the goods and beyond six months from the relevant date, the department was required to place material showing suppression so as to sustain the extended limitation period. No material was produced to justify the allegation of suppression, and the basis of the demand was not satisfactorily established.

Conclusion: The demand could not be sustained and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the adjudication order confirming duty was set aside.

Ratio Decidendi: Where the department seeks to deny exemption and invoke the extended period of limitation, it must substantiate the factual allegation on which the demand rests and adduce material showing suppression of facts; absent such material, the demand cannot stand.

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