Extended limitation cannot rest on suppression allegations when factory clearances were under departmental physical control and checks.

Extended period of limitation under the proviso to Section 11A(1) could not be invoked on a bare allegation of suppression of production and clearances where the factory was under the physical control of departmental officers and manufacture and clearance were subject to departmental checks. In such circumstances, suppression alone was insufficient unless collusion between the officers and the assessee was alleged. The demand was therefore time-barred, and the duty confirmation was held unsustainable; the appeal was allowed and the impugned order set aside.

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Issues: Whether the extended period of limitation under the proviso to Section 11A(1) could be invoked on the allegation of suppression of production and clearance when the factory was under the physical control of departmental officers.

Analysis: The show cause notice proceeded on alleged suppression for invoking the extended period. The governing principle applied was that where the factory is under the physical control of departmental officers and the manufacture and clearance are subject to departmental checks, the extended period cannot be invoked merely on allegations of suppression relating to production and clearances, unless collusion between the officers and the assessee is alleged.

Conclusion: The extended period was not available, the demand was time-barred, and the order confirming duty was unsustainable. The appeal was therefore allowed and the impugned order set aside.

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