Extended limitation and penalty cannot survive where central excise liability was already concluded and departmental permission remained unwithdrawn.

Central excise duty demand was held unsustainable where the assessee's duty liability for the same period had already attained finality in earlier proceedings. The department had granted permission to discharge duty under Section 3, and that permission was neither reviewed nor withdrawn. In those circumstances, the extended period of limitation could not be invoked because there was no surviving basis to reopen the concluded issue, and the foundation for penalty also failed. The Tribunal's relief to the assessee was therefore upheld and the department's challenge failed.

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Issues: Whether the demand of central excise duty, invocation of the extended period of limitation, and levy of penalty were sustainable in view of the earlier adjudication and the permissions granted by the department.

Analysis: The appeal arose from a challenge to the Tribunal's order which had granted relief to the assessee on the basis of undisputed facts. The dispute for the same period had already travelled through prior proceedings, and the issue regarding the assessee's duty liability had attained finality in the assessee's own case. The Court noted that the department had itself granted permission to the assessee to discharge duty under Section 3, that such permission was never shown to have been reviewed or withdrawn, and that the Tribunal had correctly taken these circumstances into account. In that setting, the extended period of limitation could not be invoked, because the underlying issue had already been concluded, and the foundation for penalty also disappeared.

Conclusion: The demand, invocation of the extended period, and penalty were not sustainable. The appeal was rejected and the assessee succeeded.

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