Extended limitation and lack of corroboration defeat duty demand based on private records and alleged clandestine clearance.

A duty demand for clearances of acid slurry was held time-barred because the notice was issued more than five years after the relevant clearances, so the extended limitation period under section 11A could not sustain that part of the demand. The alleged unaccounted manufacture and clearance of detergent powder based on a private record of 700 tons of soda ash was also rejected, because the record did not prove exclusive use for clandestine production and there was no independent evidence of production or removal beyond the RG 1 register. The demand and penalty therefore did not survive.

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Issues: (i) whether the duty demand for the clearances of acid slurry was barred by limitation under the extended period; (ii) whether the demand of duty on the alleged unaccounted manufacture and clearance of detergent powder from 700 tons of soda ash was sustainable on the evidence.

Issue (i): whether the duty demand for the clearances of acid slurry was barred by limitation under the extended period.

Analysis: The demand related to clearances made in October 1985, while the notice was issued in May 1992. The period of five years contemplated for the extended period under section 11A was exceeded, and no basis survived for sustaining that part of the demand.

Conclusion: The demand on this count was barred by limitation and was not sustainable.

Issue (ii): whether the demand of duty on the alleged unaccounted manufacture and clearance of detergent powder from 700 tons of soda ash was sustainable on the evidence.

Analysis: The case rested on the private record entry showing 700 tons of soda ash and on the inference that it must have been used in manufacturing detergent powder cleared without duty. The record did not establish that the soda ash was used only for the alleged unaccounted clearances, nor did the notice or the order contain independent evidence showing production and removal in excess of the goods reflected in the RG 1 register. The conclusion drawn against the assessee was therefore unsupported and amounted only to conjecture.

Conclusion: The duty demand on this allegation was not proved and could not be sustained.

Final Conclusion: The impugned demand and penalty did not survive, and the appeal succeeded.

Ratio Decidendi: A duty demand cannot be upheld on mere inference from private records without corroborative evidence of unaccounted manufacture and clearance, and a demand raised beyond the statutory limitation period is unsustainable.

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