Clandestine removal and extended limitation fail where private records lack corroboration and suppression is not properly alleged.

Uncorroborated private notebooks, sale bills and statements were insufficient to prove clandestine clearance of latex foam articles beyond the exemption limit, so the duty demand, confiscation and penalty could not be sustained. A purchaser's denial without supporting evidence did not displace the assessee's explanation, and a limited period of alleged unaccounted production could not be extrapolated across the entire demand period. The extended limitation period was also unavailable because the show cause notice lacked a clear statutory basis and a proper allegation of suppression. The assessee was therefore entitled to the exemption, and the impugned orders were set aside.

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Issues: (i) Whether the Department had established, on substantive evidence, that the appellant had effected clearances of latex foam articles in excess of the exemption limit so as to sustain the duty demand, confiscation and penalty; (ii) Whether the demand was barred by limitation in the absence of a proper foundation for invoking the extended period.

Issue (i): Whether the Department had established, on substantive evidence, that the appellant had effected clearances of latex foam articles in excess of the exemption limit so as to sustain the duty demand, confiscation and penalty.

Analysis: The evidence relied upon consisted mainly of private notebooks, sale bills, and statements, but the record did not satisfactorily establish that latex adhesive sales were a camouflage for clandestine clearance of latex foam articles. A mere denial by a purchaser, without corroborative proof, was insufficient to displace the appellant's explanation. The recorded unaccounted production for a limited period could not safely be projected for the entire period to sustain the higher turnover alleged by the Department. In these circumstances, the evidentiary basis for concluding that the exemption limit had been crossed was not made out with certainty.

Conclusion: The issue is decided in favour of the assessee, and the duty demand, confiscation and penalty could not be sustained on the evidence adduced.

Issue (ii): Whether the demand was barred by limitation in the absence of a proper foundation for invoking the extended period.

Analysis: The demand related not merely to the seized goods but to alleged clearances for an earlier period, and the show cause notice did not clearly invoke the statutory basis required for the longer limitation period. In the absence of a clear allegation of suppression and in view of the nature of the demand, the plea of limitation had force. This supported the appellant's challenge to the demand as time-barred.

Conclusion: The issue is decided in favour of the assessee, and the demand was liable to fail on limitation as well.

Final Conclusion: The appellant was entitled to the benefit of the exemption notification, and the impugned duty, confiscation and penalty orders were set aside, resulting in allowance of all appeals.

Ratio Decidendi: A demand under central excise law cannot be sustained on the basis of uncorroborated private records and unproved assumptions of clandestine removal, and the extended period of limitation requires a proper statutory foundation.

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