Limitation on excise demand: recycled factory scrap and absence of suppression barred invocation of the extended period.

A demand for duty on recycled scrap arising during manufacture of castings was held time-barred because the notice alleged no fraud or deliberate suppression with intent to evade duty. The authorities were treated as aware of the manufacturing process and the emergence of scrap within the factory, and the assessee's conduct was consistent with a bona fide belief that no duty was payable. On those facts, the extended period under Rule 9(2) read with Section 11A of the Central Excise Act, 1944 could not be invoked, and the demand failed on limitation.

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Issues: Whether the demand was barred by limitation and the extended period under Rule 9(2) read with Section 11A of the Central Excise Act, 1944 could be invoked.

Analysis: The appellants had been manufacturing castings and the scrap arose in the course of manufacture and recycling within the factory. The notice contained no allegation of fraud or deliberate suppression with intent to evade duty. In the circumstances, the authorities could be attributed knowledge of the manufacturing process and the emergence of scrap, and the assessee's conduct was consistent with a bona fide belief that no duty was payable on the recycled scrap. On these facts, invocation of the extended period was not justified.

Conclusion: The demand was time-barred and the extended period of limitation could not be invoked. The issue was decided in favour of the assessee.

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