Revenue neutrality and full disclosure barred extended limitation, defeating the duty demand and consequential penalties.

Where the assessee's declarations disclosed the manufacture, captive consumption and exemption claim, and the department was aware of that position, the extended period for suppression or intent to evade could not be invoked. The Tribunal also treated the availability of Modvat credit on the intermediate product as supporting revenue neutrality, which negatived an allegation of deliberate evasion. On that basis, the duty demand was time-barred and the consequential penalties on the company and its officers and employees could not survive.

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Issues: Whether the demand of additional duty and the related penalties were barred by limitation on the ground that the assessee had disclosed the manufacturing activity and claimed exemption in the relevant declarations, and whether revenue neutrality negatived any intention to evade duty.

Analysis: The declarations filed by the assessee showed the manufacture and captive consumption of the goods, and in at least some handwritten declarations the exemption claim was made contemporaneously. The record also indicated that the department was aware of the claim under the notification. The Tribunal further found that RT 12 returns and the availability of Modvat credit for duty paid on the intermediate product supported the assessee's plea that there was no intent to evade duty. In these circumstances, the extended period was not sustainable. Since the duty demand itself was time-barred, the penalties imposed on the company and on the officers and employees also could not stand.

Conclusion: The demand was held to be barred by limitation and the penalties were set aside in favour of the assessee.

Ratio Decidendi: Where the assessee has made the relevant declaration and the duty position is revenue neutral, the extended period of limitation for suppression or intent to evade cannot be invoked.

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