SSI exemption option and limitation fail where a solitary duty-paid clearance is inadvertent and misdeclaration is unproved.

A solitary duty-paid clearance, supported by a mark treated as identification and not a brand name, did not constitute an exercise of option under the first proviso to para 4 of Notification No. 1/93-C.E. because no written option was filed and the evidence suggested a clerical error rather than a deemed election. The demand on that basis was therefore not sustainable. The extended period of limitation also failed, as the show cause notice was issued beyond the normal period and the record did not establish deliberate suppression or misdeclaration. In the absence of substantiating material, the demand was barred by limitation and the penalty could not survive.

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Issues: (i) Whether a solitary clearance on payment of duty, with goods marked for identification, amounted to an exercise of option under the first proviso to para (4) of Notification No. 1/93-C.E.; and (ii) whether the demand was sustainable by invoking the extended period of limitation on the allegation of misdeclaration.

Issue (i): Whether a solitary clearance on payment of duty, with goods marked for identification, amounted to an exercise of option under the first proviso to para (4) of Notification No. 1/93-C.E.

Analysis: The assessee had not filed any written option under the proviso. It was already clearing other branded goods on payment of duty, and the disputed clearance was a solitary instance. The mark used on the consignment was supported by the consignee's disclaimer and was accepted as a mark for identification rather than a brand name. The explanation of clerical error in clearing one consignment on payment of duty was found plausible, and the proviso did not expressly create a deemed exercise of option merely because duty had been paid on one clearance.

Conclusion: The solitary clearance did not amount to an exercise of option under the proviso, and the duty demand on that basis was not sustainable.

Issue (ii): Whether the demand was sustainable by invoking the extended period of limitation on the allegation of misdeclaration.

Analysis: The show cause notice was issued beyond the normal period. The foundation for extending limitation was misdeclaration, but the record did not establish any deliberate suppression or misdeclaration. In the absence of substantiating material, the extended period could not be invoked.

Conclusion: The demand was barred by limitation and the extended period could not be applied.

Final Conclusion: The assessee succeeded on both the substantive exemption issue and the limitation issue, and the demand and penalty could not survive.

Ratio Decidendi: A solitary inadvertent duty-paid clearance, without a written option and without evidence of deliberate misdeclaration, does not amount to a deemed exercise of option under an SSI exemption notification, and the extended period of limitation cannot be invoked in the absence of proved suppression or misdeclaration.

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