Extended limitation cannot be invoked where the assessee disclosed the manufacturing process and the Department already knew the same facts.

Sufficient disclosure of the manufacturing process in the assessee's declarations, together with the Department's prior knowledge from an earlier show cause notice on the same facts, prevented invocation of the extended period of limitation. The disclosed information put the Department on notice that HDPE tubes or fabrics were the relevant raw material, so suppression of material facts or misstatement could not be attributed to the assessee. As no basis existed for the longer limitation period, the demand was held time-barred and set aside.

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Issues: Whether the demand could be sustained by invoking the extended period of limitation in view of the declarations filed by the assessee and the earlier departmental action on the same facts.

Analysis: The assessee had disclosed in its declarations that the final product was stitched out of HDPE tubes or fabrics. Such disclosure was sufficient to put the Department on notice that the tubes or fabrics were the relevant raw material, and the existence of an earlier show cause notice on the same issue further showed that the Department was aware of the facts. On these facts, suppression of material particulars or misstatement could not be attributed to the assessee, and the longer limitation period was not available.

Conclusion: The extended period of limitation was not invocable and the demand was time-barred, in favour of the assessee.

Final Conclusion: The impugned demand was set aside because the notice could not be sustained on limitation.

Ratio Decidendi: Where the assessee has made a sufficient disclosure of the relevant manufacturing process and the Department has prior knowledge of the same issue, the extended period of limitation cannot be invoked absent suppression of facts or intent to evade duty.

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