Material disclosure defeats suppression plea and bars extended limitation for duty demand and penalty.

Disclosure of job-work activity in the classification list and related correspondence defeated the allegation of suppression. Once the department was aware of the activity, the extended limitation period could not be invoked to sustain the duty demand under the exemption framework. The demand based on suppression therefore failed, and the connected penalty under Rule 173Q also could not survive because it rested solely on the same allegation.

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Issues: Whether the demand of duty and penalty could be sustained by invoking the extended period on the allegation of suppression of facts, despite disclosure of job-work activity in the classification list and related correspondence.

Analysis: The appellant had disclosed the undertaking of job-work activities in the classification list and had also referred to the activity in correspondence with the department. The finding that the fact of job work was not disclosed in the classification list was held to be incorrect. Once the department was aware that job work was being undertaken, it could not ignore the effect of that disclosure for purposes of the exemption limit under Notification No. 175/86-C.E. In these circumstances, the invocation of the longer limitation period was not justified, and the demand founded on suppression could not stand. As the duty demand itself failed, the penalty imposed under Rule 173Q also could not survive.

Conclusion: The extended period of limitation was held inapplicable, the duty demand was set aside, and the penalty was held unsustainable.

Ratio Decidendi: Where the assessee has made a material disclosure of the relevant activity to the department, the extended period cannot be invoked on a plea of suppression, and a penalty based solely on that allegation cannot be sustained.

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