Contemporaneous test records override private reports; excise duty demand, limitation and penalty failed for lack of suppression.

Differential excise duty could not rest solely on private monthly reports when contemporaneous departmental test memos, official test results and other records supported the declared counts. The demand was therefore set aside. A further demand for invisible loss also failed because the department had accepted the assessee's accounting stage in earlier practice and the trade notice supported that method; with no suppression proved, the extended limitation period could not be invoked, making the claim time-barred. As the underlying demand failed, the associated penalty also could not survive and was set aside, with consequential relief granted to the assessee.

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Issues: (i) Whether the demand of differential duty based only on private monthly reports could be sustained when departmental and other contemporaneous test results showed the declared counts to be correct; (ii) Whether the demand relating to invisible loss and the consequential penalty were sustainable in the absence of suppression and in view of the prior departmental practice and limitation.

Issue (i): Whether the demand of differential duty based only on private monthly reports could be sustained when departmental and other contemporaneous test results showed the declared counts to be correct.

Analysis: The only material relied upon for the alleged higher-count manufacture was a private record, but the assessee had explained the purpose of those reports and had also produced contemporaneous test memos and other records. The departmental records and the reports of other governmental authorities showed that the samples tallied with the declared counts. In these circumstances, the private entries, standing alone, could not override the contemporaneous official test results and the other accounting records maintained by the assessee.

Conclusion: The demand on this count was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the demand relating to invisible loss and the consequential penalty were sustainable in the absence of suppression and in view of the prior departmental practice and limitation.

Analysis: The demand covered a period substantially beyond six months, so the extended period could be invoked only if suppression was established. The earlier departmental order had accepted cone winding as the relevant accounting stage, and the trade notice also supported the assessee's practice. This showed that the method followed was known to the department. Since no suppression was proved, the extended period could not be applied, and the demand was time-barred. As the underlying demand failed, the penalty under the penal rule also could not survive.

Conclusion: The demand on invisible loss and the penalty were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded in full, the impugned order was set aside, and consequential relief followed.

Ratio Decidendi: A demand of excise duty cannot be sustained solely on a private record when contemporaneous departmental and official test results negate the alleged suppression, and the extended limitation period cannot be invoked without proof of suppression of facts.

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