Extended limitation in excise requires positive suppression; known testing samples under departmental control did not justify the demand.

Removal of cigarette samples for laboratory testing was treated as a known factory practice under departmental control, and the instructions noted that no excise duty was charged on samples used for testing if they were irretrievably lost or otherwise properly accounted for. On that basis, no positive suppression or intent to evade duty was shown, so the extended period of limitation could not be invoked. The demand therefore failed as time-barred, and the levy on the samples was not sustained.

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Issues: Whether duty was payable on cigarettes removed for laboratory testing and whether the extended period under the limitation provision could be invoked on the ground of suppression with intent to evade duty.

Analysis: The removal of samples for testing was held to be a known and established practice in a factory under physical control, where departmental officers were posted and could reasonably be aware of such removals. The departmental instructions also stated that no excise duty was charged on samples issued for test purposes inside the factory if they were irretrievably lost in the process of testing or otherwise properly accounted for. Since the samples were destroyed in testing and no positive act of suppression or intent to evade duty was shown, the ingredients needed to invoke the extended period were not established.

Conclusion: The extended period of limitation could not be invoked and the demand failed on limitation; the finding on duty liability was set aside in favour of the assessee.

Final Conclusion: The appeal was allowed because the demand was time-barred, and the merits of the levy were not examined.

Ratio Decidendi: To invoke the extended limitation period in excise, the revenue must establish a positive act of suppression or similar conduct with intent to evade duty; mere non-intimation or inaction is insufficient, especially where the removals were part of a known testing practice under departmental control.

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