Exemption for steel scrap and limitation fail where goods are disclosed and deliberate misdeclaration is not proved.

Axle cuttings and punches, and end cuttings of sheets, were treated as substantially falling within the exempt category of fresh unused steel melting scrap commonly known as butts and shorts under Notification No. 150/77-C.E.; side cuttings of sheets were not shown to qualify, and the department failed to establish their separate quantity. The alleged short levy was also held not to rest on deliberate misdeclaration, because the goods were disclosed in gate passes and AR-3As, an earlier appellate order had accepted the assessee's classification, and the penalty was inconsistent with suppression. The longer limitation period was therefore unavailable and the demand was time barred.

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Issues: (i) whether axle cuttings and punches, and end cuttings of sheets, could be treated as butts and shorts entitled to exemption under Notification No. 150/77-C.E.; (ii) whether the demand was barred by limitation for want of deliberate misdeclaration.

Issue (i): whether axle cuttings and punches, and end cuttings of sheets, could be treated as butts and shorts entitled to exemption under Notification No. 150/77-C.E.

Analysis: The exemption under Rule 8(1) of the Central Excise Rules, 1944 covered fresh unused steel melting scrap of the types commonly known as butts and shorts, subject to the prescribed conditions and use in the manner stated in the notification. The dispute was confined to the true character of the goods. On the material before it, the goods described as axle cuttings and punches, and end cuttings of sheets, were held to be more reasonably referable to butts and shorts than to non-qualifying scrap, though side cuttings of sheets were not shown to fall within the exempted category. The department also failed to establish the quantity attributable to the non-eligible items.

Conclusion: The goods substantially qualified as butts and shorts for the purpose of the exemption, except for side cuttings of sheets.

Issue (ii): whether the demand was barred by limitation for want of deliberate misdeclaration.

Analysis: The finding of deliberate misdeclaration was not supported by the surrounding circumstances. The goods had been declared in gate passes and AR-3As, an earlier appellate order had accepted the assessee's stand on butts and shorts, and the penalty imposed was wholly inconsistent with the alleged gravity of suppression. On that basis, the conclusion was reached that the short levy was not caused by deliberate misdeclaration and the longer limitation period was unavailable.

Conclusion: The demand was time barred.

Final Conclusion: The assessment order was set aside because the demand could not be sustained in the absence of deliberate misdeclaration and was therefore barred by limitation, with the assessee obtaining relief.

Ratio Decidendi: Where the department fails to establish deliberate misdeclaration or suppression, the extended limitation period cannot be invoked and the demand is barred by time.

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