Extended limitation cannot rest on suppression alone when departmental officers verified declarations and accepted clearances.

A show cause notice invoking the extended limitation period for alleged diversion of imported crude oil failed because the department's own officers had visited the unit, verified declarations, examined the matter at hierarchy level, and cancelled the bonds after being satisfied that the conditions were met. On those facts, suppression could not be inferred merely from discrepancies in the assessee's records, and any allegation of longer limitation based on suppression required pleading collusion and proceeding against the concerned officers as well. As that was not done, the notice was defective, the extended period was unavailable, and the demands and penalties were set aside.

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Issues: Whether the demand and penalties were sustainable when the show cause notice invoked the extended period without alleging collusion against the departmental officers who had verified the declarations and cancelled the bonds.

Analysis: The demand arose from alleged diversion of imported crude oil and alleged non-compliance with the concessional import rules, but the record showed that the jurisdictional officers had visited the unit, some Annexure-V declarations were verified, the investigation had been examined by the departmental hierarchy, and the Assistant Commissioner had cancelled the bonds after being satisfied that the conditions were met. On these facts, the finding of suppression could not be sustained merely on the basis of alleged discrepancies in the assessee's records. The Tribunal held that, if the department's own officers had acquiesced in the clearances and the alleged suppression was to be used for invoking the longer limitation, the show cause notice had to allege collusion and proceed against the concerned officers as well. That was not done.

Conclusion: The extended period of limitation was not available to the department and the show cause notice was fatally defective. The impugned order could not be sustained and the demands and penalties were set aside in favour of the assessee.

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