Extended limitation under Section 11A requires specific pleading of clandestine removal; vague notices cannot sustain duty demand.

A show cause notice invoking the extended limitation period under Section 11A must specifically plead the factual basis for that invocation, including the relevant period of alleged clandestine removal. Where the notice refers only to inspection findings of shortage and excess and omits that essential allegation, the extended demand cannot be sustained and is treated as illegal and void. Separately, negligence in maintenance of accounts may justify penalty, and a reduced penalty may be sustained where no basis exists to interfere with the appellate reduction. The duty demand was set aside, while the reduced penalty was upheld.

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Issues: (i) Whether the show cause notice invoking the extended period under Section 11A was valid and the duty demand could be sustained; (ii) Whether the penalty confirmed against the assessee was liable to be upheld.

Issue (i): Whether the show cause notice invoking the extended period under Section 11A was valid and the duty demand could be sustained.

Analysis: The notice was issued after the amendment to Section 11A which vested power to invoke the extended period in the Collector. The notice referred only to detection of shortage and excess on inspection and did not allege with specificity that the clandestine removal had occurred within the relevant six-month period. In the absence of such an allegation, the department could not fill the gap by presumption or later investigation, and the deficiency in the notice had to operate in favour of the assessee.

Conclusion: The notice invoking the extended period was held illegal and void so far as the duty demand was concerned, and the demand was set aside.

Issue (ii): Whether the penalty confirmed against the assessee was liable to be upheld.

Analysis: The record showed negligence in maintenance of accounts, and the assessee's conduct justified penal consequences. The appellate authority had already reduced the penalty substantially, and no reason was found to interfere with that limited penalty.

Conclusion: The penalty was upheld.

Final Conclusion: The appeal succeeded only to the extent of setting aside the duty demand, while the reduced penalty was sustained.

Ratio Decidendi: A show cause notice invoking the extended limitation period must clearly plead the factual basis for such invocation, and where the notice is silent on the period of alleged clandestine removal, the extended demand cannot be sustained.

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