Suppression of stock discrepancies justified extended limitation and sustained duty demand for unaccounted clearances of cotton yarn.

Failure to disclose stock discrepancies and unaccounted clearances in statutory records was treated as suppression of facts, allowing invocation of the extended limitation period. The Tribunal also found that the assessee's explanations for processing loss, hard waste and accounting adjustments were not satisfactorily supported by the stock verification and register entries, while the verification itself was conducted with the assessee's participation. On that basis, the alleged shortages were accepted as evidence of removal of goods without payment of duty, and the duty demand with consequential penalty was upheld. The appeal was dismissed in full.

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Issues: (i) Whether the demand was barred by limitation or whether the extended period could be invoked on the facts found; (ii) whether the demand and penalty were sustainable on merits in view of the alleged shortages and unaccounted clearances of cotton yarn.

Issue (i): Whether the demand was barred by limitation or whether the extended period could be invoked on the facts found.

Analysis: The period in dispute was covered by a notice issued later, and the assessee had filed RT 12 returns and annual stock-taking records. However, the records showed discrepancies, and the assessee did not satisfactorily explain why the claimed waste and shortages were not brought to the Department's notice during the relevant period. The failure to disclose the material facts relating to stock differences and clearances was treated as suppression of facts, warranting application of the extended limitation period.

Conclusion: The extended period of limitation was rightly invoked and the demand was not time-barred.

Issue (ii): Whether the demand and penalty were sustainable on merits in view of the alleged shortages and unaccounted clearances of cotton yarn.

Analysis: The assessee's explanation based on processing loss, hard waste, and alleged accounting adjustments was examined against the stock-taking results and register entries. The Tribunal found that the alleged waste was not satisfactorily accounted for at the relevant stage and that the discrepancies in physical stock and records supported the finding of removal of goods without payment of duty. The challenge to the accuracy of stock verification was rejected because the verification was conducted with the assessee's participation and the explanation for shortages was found unconvincing.

Conclusion: The duty demand and consequential penalty were upheld.

Final Conclusion: The appeal failed in entirety, and the order confirming the duty demand and penalty was sustained.

Ratio Decidendi: Failure to disclose stock discrepancies and unaccounted clearances in the statutory records amounts to suppression of facts, justifying invocation of the extended limitation period and confirmation of duty demand.

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