Extended limitation requires proved suppression when exemption was granted on disclosed facts and approved classification lists.

Roxithromycin manufactured before 1-1-1997 was not shown to satisfy the prescribed pharmacopoeial or other standards, so exemption under the cited excise notifications was unavailable for that earlier period. The demand was nevertheless time-barred because the department had already approved the classification lists and granted exemption on the same disclosed facts, and suppression was not established; the extended limitation period could not be invoked. As the demand failed on limitation and the departmental approvals had stood for a long period, penalties were also not sustainable.

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Issues: (i) Whether roxithromycin manufactured prior to 1-1-1997 qualified as a bulk drug entitled to exemption under Notification No. 6/94 and Notification No. 8/95; (ii) whether the demand was barred by limitation and the extended period under the proviso to section 11A(1) of the Central Excise Act, 1944 was available; and (iii) whether penalties were sustainable.

Issue (i): Whether roxithromycin manufactured prior to 1-1-1997 qualified as a bulk drug entitled to exemption under Notification No. 6/94 and Notification No. 8/95.

Analysis: The exemption depended on the product conforming to the prescribed pharmacopoeial or other standards. For the relevant period, roxithromycin was not shown to be included in any applicable official pharmacopoeia, and therefore the required standards of identity, purity and strength had not been prescribed for it. Its later inclusion from 1-1-1997 did not alter the character of the goods manufactured during the earlier period.

Conclusion: The denial of exemption for the period prior to 1-1-1997 was upheld on merits, but only as a matter of substantive eligibility for that earlier period.

Issue (ii): Whether the demand was barred by limitation and the extended period under the proviso to section 11A(1) of the Central Excise Act, 1944 was available.

Analysis: The department had long approved the classification lists and granted exemption on the very goods in question. The same material facts were available to the officers at the relevant time, and the retrospective amendments in the Finance Act did not automatically make the extended period available in every case. On these facts, suppression was not established and the extended period could not be invoked.

Conclusion: The demand was barred by limitation and invocation of the extended period was rejected.

Issue (iii): Whether penalties were sustainable.

Analysis: Once the demand itself failed on limitation, and the department had approved the classification and exemption over a long period, the foundation for penal action did not survive.

Conclusion: Penalties were not sustainable.

Final Conclusion: The appeals succeeded, the duty demands and penalties were set aside, and the assessees obtained complete relief.

Ratio Decidendi: Where the department has approved classification and granted exemption on the same disclosed facts over a sustained period, the extended period of limitation cannot be invoked absent proved suppression, and later statutory validation does not by itself establish suppression for every case.

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