Extended limitation cannot be invoked where facts were already known and penalty needs a specific contravention

Central excise duty demand for the disputed period was held time-barred because the Department already knew the relevant facts from earlier visits, panchnamas, seizures and recorded statements, yet issued the show cause notice after the normal limitation period; on those facts, the extended period was not available. Penalty also failed because the order did not identify any specific contravention under the relevant penal rule, and a penalty cannot stand without a clear and proven breach. The impugned order was therefore set aside, with the demand and penalty both failing on limitation and defective penal foundation.

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Issues: (i) whether the demand of central excise duty for the disputed period was barred by limitation and whether the extended period could be invoked; (ii) whether penalty could be sustained in the absence of a specific contravention.

Issue (i): whether the demand of central excise duty for the disputed period was barred by limitation and whether the extended period could be invoked.

Analysis: The disputed clearances related to a period already within the Department's knowledge through earlier visits, panchnamas, seizures, and recorded statements. The Tribunal noted that the show cause notice was issued long after the expiry of the normal limitation period and that the same material had already formed the basis of earlier proceedings. On these facts, invocation of the extended period was not justified.

Conclusion: The duty demand was time-barred and the extended period of limitation was not available to the Revenue.

Issue (ii): whether penalty could be sustained in the absence of a specific contravention.

Analysis: The Tribunal found that the penalty order did not specify any clear contravention under the relevant penal rule. In the absence of a definite and identifiable breach, the penalty lacked legal support and could not stand.

Conclusion: The penalty was unsustainable.

Final Conclusion: The impugned order was set aside and the appeals were allowed, with the entire demand and penalty failing on limitation and on the defect in the penal basis.

Ratio Decidendi: Where the Department already has knowledge of the facts and delays issuance of the notice beyond the normal period, the extended period cannot be invoked; a penalty must also rest on a specific proved contravention.

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