Extended limitation and unproposed penalty under excise law cannot stand without proven suppression or notice-based proposal.

Extended limitation under Section 11A(4) of the Central Excise Act, 1944 is not justified where the department already knew the relevant facts, the notice is issued after a substantial delay, and suppression with intent to evade duty is not substantiated. A penalty under Rule 26 of the Central Excise Rules, 2002 cannot be sustained when the show cause notice did not propose that penalty and the order confirms it mechanically without supporting reasons. The commentary concludes that the order was set aside and consequential relief followed.

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Issues: (i) whether the invocation of the extended period of limitation was justified, and (ii) whether penalty under Rule 26 of the Central Excise Rules, 2002 could be sustained when the show cause notice did not propose such penalty.

Issue (i): Whether the invocation of the extended period of limitation was justified.

Analysis: The notice was issued more than three years after the departmental visit and after the assessee had already registered and made deposits towards the differential duty. The record showed that the department was aware of the relevant facts well before the notice. In that background, the allegation of suppression with intent to evade duty was not substantiated, and the invocation of the extended period under Section 11A(4) of the Central Excise Act, 1944 was not justified.

Conclusion: The extended period of limitation was wrongly invoked and this issue was decided in favour of the assessee.

Issue (ii): Whether penalty under Rule 26 of the Central Excise Rules, 2002 could be sustained when the show cause notice did not propose such penalty.

Analysis: The show cause notice contained no proposal for penalty under Rule 26, yet the penalty was confirmed mechanically in the impugned order. Such a penalty could not be sustained in the absence of a corresponding proposal in the notice and without recorded reasons supporting it.

Conclusion: The penalty under Rule 26 of the Central Excise Rules, 2002 was unsustainable and this issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Extended limitation cannot be invoked without substantiated suppression or intent to evade duty, and a penalty not proposed in the show cause notice cannot be confirmed.

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