Extended limitation cannot apply without proven suppression, and penalty fails when the department already knew the relevant facts.

Extended limitation could not be invoked where the proforma credit was taken with departmental permission and knowledge, and the relevant particulars were disclosed in prescribed records and returns; on that factual basis, the duty demand was time-barred. In the absence of any substantiated allegation of fraud, collusion, wilful misstatement, or suppression of facts, the extended period of limitation failed. For the same reason, the penalty had no sustainable legal foundation and was set aside.

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Issues: Whether the duty demand was time-barred for want of valid invocation of the extended limitation period, and whether penalty was sustainable.

Analysis: The proforma credit had been availed under departmental permission and with departmental knowledge, and the relevant particulars were reflected in the prescribed records and returns. The notice was issued beyond the normal six-month period, but it did not invoke or justify the extended period on the basis of fraud, collusion, wilful misstatement, or suppression of facts. The allegation of non-disclosure was not substantiated on the record. In the absence of a legally sustainable basis for extending limitation, the duty demand could not survive. Since the factual foundation for contravention was also absent, the penalty was equally unjustified.

Conclusion: The duty demand was time-barred and the penalty was unsustainable; both were set aside in favour of the assessee.

Ratio Decidendi: Where the department has knowledge of the relevant facts and no valid allegation of fraud, collusion, wilful misstatement, or suppression of facts is made, the extended period of limitation cannot be invoked, and penalty cannot be sustained on the same unsupported footing.

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