Clandestine clearance demands fail without corroboration: natural justice lapses and no suppression bar the extended limitation period.

Duty demand for alleged suppressed production and clandestine clearance failed where statutory records, despatch details and in-house consumption data supported the assessee's account. The authority's failure to consider written submissions and supporting material indicated non-application of mind, and non-supply of the relied-upon silo dip register after remand breached natural justice. With no convincing evidence of excess raw material or power consumption, no contractor investigation, and no material showing suppression of facts, the extended period of limitation could not be invoked. The demand, penalty and interest were therefore held unsustainable and set aside in favour of the assessee.

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Issues: Whether the duty demand, penalty and interest could be sustained on the allegation of suppressed production and clandestine clearance, and whether the extended period of limitation was invocable.

Analysis: The demand was founded on alleged excess production and clearance without payment of duty, but the record showed that the assessee had produced details of despatches and in-house consumption, and that the statutory records reflected the relevant quantities. The authority below failed to consider the written submissions and supporting data, showing non-application of mind. The relied-upon silo dip register was not furnished despite a remand direction, which amounted to violation of the principles of natural justice. There was also no convincing evidence of excess consumption of raw materials or power, no investigation of the contractors, and no material to establish suppression of facts. In these circumstances, the foundation for invoking the extended period was not made out.

Conclusion: The duty demand, penalty and interest were not sustainable and were set aside in favour of the assessee.

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