Duty-paid rerollable inputs can qualify for excise exemption absent Department proof they were non-duty paid.

Market-purchased rerollable iron and steel material was treated as duty-paid input for exemption under Notification No. 202/88-C.E. and the amending Notification No. 33/92-C.E. because the record did not show the goods were clearly non-duty paid, and departmental materials supported a deemed duty-paid treatment unless the Department proved otherwise. The extended period of limitation and penalties were not sustainable because the assessee had filed declarations, maintained purchase and stock records, and produced RT-2 returns, while no deliberate suppression or intent to evade duty was established.

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Issues: (i) Whether the rerollable materials purchased from the open market were to be treated as duty-paid inputs for the purpose of exemption under Notification No. 202/88-C.E. and the amending Notification No. 33/92-C.E. (ii) Whether the extended period of limitation and penalties were sustainable on the allegation of suppression of facts.

Issue (i): Whether the rerollable materials purchased from the open market were to be treated as duty-paid inputs for the purpose of exemption under Notification No. 202/88-C.E. and the amending Notification No. 33/92-C.E.

Analysis: The inputs consisted of rerollable iron and steel material purchased from the market and old used rails and sleepers from the Railways. The applicable exemption treated all stocks of inputs as duty-paid except those clearly recognisable as non-duty paid or charged to nil rate of duty. The record did not show that the goods purchased from the market were clearly recognisable as non-duty paid. Board circulars and orders also supported the view that market purchases of rerollable material were to be treated as duty-paid unless the Department proved otherwise. The amending notification from 1-3-1992 specifically covered rerollable iron and steel material other than stainless steel.

Conclusion: The inputs were entitled to be treated as duty-paid, and the exemption was available to the assessee.

Issue (ii): Whether the extended period of limitation and penalties were sustainable on the allegation of suppression of facts.

Analysis: The appellants had filed declarations, maintained purchase and stock records, produced RT-2 returns and related documents, and had been dealing with the department openly over a long period. The consistent departmental and Board position on deemed duty-paid character of market purchases created a bona fide belief. In the absence of proof that the goods were non-duty paid or that there was deliberate suppression with intent to evade duty, the ingredients for invoking the extended period were not established.

Conclusion: The extended period of limitation was not invokable, and the penalties could not be sustained.

Final Conclusion: The demands and penalties were set aside, and the appellants were held entitled to consequential relief in accordance with law.

Ratio Decidendi: When market-purchased rerollable inputs are not shown by the Department to be clearly non-duty paid, they are to be treated as duty-paid for exemption purposes, and the extended limitation period cannot be invoked absent deliberate suppression or intent to evade duty.

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