Extended limitation for excise duty cannot apply where the assessee disclosed intended exempt manufacture to the department.

Extended limitation for duty demand under the proviso to Section 11A of the Central Excises and Salt Act, 1944 cannot be invoked unless the assessee consciously suppresses or deliberately withholds material facts. Here, the assessee had written to the department and filed a declaration stating that soap would be manufactured by the Tawda Process without power or steam and that exemption under Notification No. 28/64-C.E. was claimed. Those disclosures put the department on notice of the intended exempt activity, so the department's failure to act on the information did not amount to suppression by the assessee. The alleged suppression was therefore unsustainable and the extended limitation period was unavailable.

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Issues: Whether the extended period of limitation under the proviso to Section 11A of the Central Excises and Salt Act, 1944 could be invoked on the allegation of suppression of facts, where the assessee had informed the department of its intention to manufacture exempt soap by the Tawda Process without aid of power or steam.

Analysis: The assessee had written letters to the department and filed a declaration stating that soap would be manufactured by the Tawda Process without the aid of power or steam and that exemption under Notification No. 28/64-C.E. dated 01-03-1964 was being claimed. These communications showed that the department was made aware of the proposed exempt manufacture and was asked to inspect and guide the process. In these circumstances, the mere omission by the department to act on the information could not be treated as suppression by the assessee. The necessary element of conscious or deliberate withholding of material facts was absent, and the record did not justify invocation of the extended limitation period.

Conclusion: The allegation of suppression of facts was not sustainable and the proviso to Section 11A of the Central Excises and Salt Act, 1944 could not be invoked against the assessee.

Ratio Decidendi: Where the assessee has disclosed the intended exempt activity to the department, extended limitation for duty demand cannot be invoked unless there is conscious suppression or deliberate withholding of material facts.

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