Misstatement of fact can justify extended limitation for duty demand, but pre-statutory interest liability cannot be imposed.

A false factual representation made to obtain exemption was treated as misstatement of fact under the proviso to Section 11A, justifying invocation of the extended period and sustaining the duty demand and penalty. However, interest could not be levied for any period before the statutory provision creating that liability came into force, so the interest claim for the earlier period had no legal basis and was set aside. The decision thus upheld the demand and penalty while denying interest for want of statutory authority during the relevant period.

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Issues: (i) whether the extended period under the proviso to Section 11A could be invoked on the basis of misstatement or suppression of facts, thereby sustaining the duty demand and penalty; (ii) whether the claim for interest was legally sustainable for a period prior to the introduction of the interest provision.

Issue (i): whether the extended period under the proviso to Section 11A could be invoked on the basis of misstatement or suppression of facts, thereby sustaining the duty demand and penalty.

Analysis: The exemption had been obtained on the specific representation that the products were pharmacopoeia items. That representation was later found to be incorrect. A false factual statement made to obtain exemption amounts to misstatement of fact within the meaning of the proviso to Section 11A, and the circumstances justified invocation of the extended period.

Conclusion: The extended period was correctly invoked and the duty demand and penalty were upheld against the assessee.

Issue (ii): whether the claim for interest was legally sustainable for a period prior to the introduction of the interest provision.

Analysis: Interest could not be levied for a period anterior to the statutory provision creating such liability. Since the duty demand related to a time before the introduction of the interest provision, the claim for interest had no legal basis.

Conclusion: The interest demand was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The duty demand and penalty were sustained, while the interest component was disallowed for want of statutory authority for the relevant period.

Ratio Decidendi: A false factual representation made to obtain exemption constitutes misstatement of fact for the purpose of the proviso to Section 11A, but interest cannot be levied for a period preceding the statutory introduction of interest liability.

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