Extended excise limitation requires proof of suppression or intent to evade; duty demand barred, penalty sustained.

Extended limitation for central excise demand under the proviso to Section 11A was unavailable because the department had not proved fraud, collusion, wilful misstatement or suppression of facts with intent to evade duty; constructive knowledge from a trade notice was insufficient. The demand for differential duty was therefore confined to the normal limitation period and was time-barred. The penalty under central excise law was not disturbed, as the goods were treated as classifiable under Tariff Item 68, compliance obligations applied, and no effective challenge was advanced against the penalty.

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Issues: (i) Whether the demand for differential excise duty could be sustained by invoking the extended five-year limitation under the proviso to Section 11A of the Central Excises and Salt Act, 1944, or was confined to the normal six-month period; and (ii) whether the penalty imposed under the Central Excise law was liable to be interfered with.

Issue (i): Whether the demand for differential excise duty could be sustained by invoking the extended five-year limitation under the proviso to Section 11A of the Central Excises and Salt Act, 1944, or was confined to the normal six-month period.

Analysis: The appellants' classification lists and connected records did not disclose the detailed description of Hastelloys B & C, but the record showed that the department was aware, or could have been aware, of the manufacture and clearance of those goods. The extended period under Section 11A is attracted only where non-levy or short-levy is due to fraud, collusion, wilful misstatement or suppression of facts with intent to evade duty. Mere reliance on a trade notice, and the assumption of constructive knowledge from it, could not by itself establish the statutory ingredients for the extended limitation. The demand therefore had to be tested on the normal limitation computed from the relevant date, and on that basis no part of the duty demand survived.

Conclusion: The extended limitation was not available against the assessee, and the duty demand was time-barred.

Issue (ii): Whether the penalty imposed under the Central Excise law was liable to be interfered with.

Analysis: The goods were held to fall under Tariff Item 68 and would require the appropriate central excise compliance, including licensing obligations under the relevant rules. No effective challenge was advanced to the penalty and the penalty amount was modest. In these circumstances, there was no basis to disturb that part of the order.

Conclusion: The penalty was upheld.

Final Conclusion: The duty demand was set aside as barred by limitation, while the penalty order was sustained, resulting in only partial relief to the assessee.

Ratio Decidendi: For invoking the extended period of limitation under Section 11A of the Central Excises and Salt Act, 1944, the department must prove the statutory ingredients of fraud, collusion, wilful misstatement or suppression of facts with intent to evade duty; constructive notice from a trade notice, without more, is insufficient.

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