Limitation under central excise law fails where clearances are disclosed and suppression is not proved, even if exemption merits are rejected.

Aluminium waste and scrap made from exempt imported rods did not qualify for Notification No. 182/84-C.E. because the notification required inputs on which duty of excise or additional customs duty had actually been paid, and the exemption claim failed on merits. However, the demand could not be raised under the extended limitation period because the assessee had disclosed the use of exempt rods and the clearances through invoices, RT 12 returns, and classification lists, so suppression or wilful misstatement was not proved. Section 11D also did not sustain recovery on the facts, and the penalty was set aside with the demand.

---

---

Issues: (i) Whether aluminium waste and scrap manufactured from imported aluminium rods cleared under exemption could claim benefit of Notification No. 182/84-C.E. dated 01.08.1984. (ii) Whether the demand was barred by limitation under Section 11A of the Central Excises & Salt Act and whether Section 11D of the Central Excises & Salt Act could sustain the demand.

Issue (i): Whether aluminium waste and scrap manufactured from imported aluminium rods cleared under exemption could claim benefit of Notification No. 182/84-C.E. dated 01.08.1984.

Analysis: The notification required that the waste and scrap be manufactured from goods on which duty of excise or additional duty of customs had already been paid. The appellants relied on the line of authority treating goods cleared under exemption or at nil duty as having satisfied the condition of duty already paid. The notification, however, also contained an exclusion for stocks clearly recognisable as non-duty-paid, and a Larger Bench ruling was noticed holding that such language covered inputs on which duty had not actually been paid, including wholly exempt goods.

Conclusion: The exemption claim on merits was not accepted.

Issue (ii): Whether the demand was barred by limitation under Section 11A of the Central Excises & Salt Act and whether Section 11D of the Central Excises & Salt Act could sustain the demand.

Analysis: The record showed disclosure of the use of exempt imported rods and clearance of scrap under exemption through invoices, RT 12 returns, and earlier classification lists. In the circumstances, suppression, wilful misstatement, or intention to evade duty was not established, so the extended period could not be invoked. As to Section 11D, the Tribunal held that no separate order under that provision had been passed and, on the facts, no recovery under it was warranted. The penalty could not survive once the demand itself failed.

Conclusion: The demand was barred by limitation and Section 11D did not support recovery.

Final Conclusion: The duty demand and penalty were set aside, and the appeal succeeded on limitation and related recovery issues despite the adverse view on exemption merits.

Ratio Decidendi: Where the assessee has disclosed the relevant clearances and the record does not establish suppression or wilful misstatement, the extended limitation period under central excise law cannot be invoked; a separate recovery under Section 11D also cannot be sustained without an order supported by the facts and the statutory basis.

---