Extended limitation under central excise law fails where omission is consistent with departmental understanding and no suppression is shown.

Non-disclosure of power use at an earlier stage in production did not amount to suppression with intent to evade duty where the department had already clarified that the relevant exemption would be denied only if power was used in converting fabrics into sacks. On that understanding, the omission in the classification list was not a material suppression for invoking the extended limitation period under the proviso to Section 11A(1) of the Central Excise Act, 1944. Because the notice was issued beyond the normal limitation period, the demand was held time-barred and the extended period could not be applied.

---

---

Issues: Whether the demand was barred by limitation and the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944 could be invoked on the allegation of suppression and intent to evade duty.

Analysis: The dispute related to non-disclosure of use of a power-operated loom at an earlier stage in the production chain. The department had already informed the trade that the exemption under Notification No. 65/87 would be denied only if power was used in converting fabrics into sacks, and that use of power at a prior stage would not by itself disqualify the goods. In that background, the non-disclosure in the classification list could not be treated as suppression of material facts or as evidence of intent to evade duty. As the notice was issued beyond six months from the relevant period, the extended limitation provision was unavailable.

Conclusion: The demand was time-barred and the proviso to Section 11A(1) of the Central Excise Act, 1944 could not be invoked; the issue was decided in favour of the assessee.

Ratio Decidendi: Where the assessee acts consistently with an express departmental understanding on the scope of an exemption, omission to disclose an earlier-stage use of power does not amount to suppression with intent to evade duty, and the extended period of limitation cannot be applied.

---