Extended limitation and penalty failed where excise facts were disclosed and no suppression was shown.

Extended limitation could not be invoked for central excise demand where the assessee had already filed a declaration disclosing the manufacturing process and the Department was aware of the relevant facts before the search and show cause notice; in the absence of suppression, misstatement, fraud or collusion, the demand was confined to the normal six-month period. Penalty was also unsustainable because a retrospective amendment to Rule 9(2) of the Central Excise Rules, 1944 could not be applied to penalise an earlier period, and the facts did not otherwise justify penalty. The balance demand and the penalty were set aside, with relief to the assessee.

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Issues: (i) Whether the demand of central excise duty was barred beyond the normal period of six months under the limitation provision, and (ii) whether the penalty imposed on the appellants was sustainable.

Issue (i): Whether the demand of central excise duty was barred beyond the normal period of six months under the limitation provision.

Analysis: The appellants had already filed a declaration claiming the benefit of exemption, and the declaration disclosed the manufacturing process of the insulated strips from bare aluminium and copper strips. On that basis, the Department was aware of the nature of manufacture before the search and show cause notice. In the absence of suppression, misstatement, fraud or collusion, the longer period could not be invoked.

Conclusion: The demand was confined to the six months preceding the show cause notice and the balance demand was set aside, in favour of the assessee.

Issue (ii): Whether the penalty imposed on the appellants was sustainable.

Analysis: The retrospective amendment in Rule 9(2) of the Central Excise Rules, 1944 could not be used to impose penalty for an earlier period, and on the facts of the case the penalty was otherwise unwarranted.

Conclusion: The penalty was set aside, in favour of the assessee.

Final Conclusion: The duty demand survived only to the limited extent of the normal limitation period, and the penalty was annulled.

Ratio Decidendi: Where the Department is already aware of the relevant manufacturing facts, the extended limitation period cannot be applied in the absence of suppression or misstatement, and a retrospective procedural amendment cannot justify penalty for a past period.

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