Exemption withdrawal and limitation in captive consumption duty demands: liability upheld on merits, but extended period rejected.

Withdrawal of Notification No. 67/86 from 1-3-1988 left no exemption for parts of electric motors captively consumed in submersible pump sets until reintroduction on 18-4-1988, so duty was correctly confirmed on merits for the intervening period. However, the demand could not be sustained under the extended limitation period because the assessee had filed RT 12 returns, assessments were finally taken up, and the department was aware of the withdrawal of the concession. The demand was therefore time barred, with relief granted on limitation despite liability on merits.

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Issues: (i) Whether duty demand for the period 1-3-1988 to 17-4-1988 was correctly confirmed when the exemption notification stood withdrawn. (ii) Whether the demand was barred by limitation.

Issue (i): Whether duty demand for the period 1-3-1988 to 17-4-1988 was correctly confirmed when the exemption notification stood withdrawn.

Analysis: The exemption under Notification No. 67/86 stood withdrawn from 1-3-1988 and was reintroduced only from 18-4-1988. During the intervening period, no exemption was available for parts of electric motors captively consumed in the manufacture of submersible pump sets.

Conclusion: The demand was correctly confirmed on merits.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The assessee filed RT 12 returns, the assessments were finally taken up by the department, and the authorities were aware of the withdrawal of the concession. In these circumstances, the demand could not be sustained by invoking the extended period.

Conclusion: The demand was time barred.

Final Conclusion: The demand was upheld on merits but set aside on limitation, resulting in relief to the assessee.

Ratio Decidendi: Where the department is aware of the relevant facts through regular returns and final assessments, the extended period cannot be invoked merely because duty became payable after withdrawal of an exemption.

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