Extended limitation for customs demand fails where the Department cannot prove suppression or wrongful declaration for exemption denial.

The extended period of limitation under the Customs Act could not be invoked to deny exemption under Notification No. 203/92-Cus where the Department failed to prove suppression, misstatement, or any factual basis for alleging wrongful declaration of non-availment of Modvat credit. The allegation was unsupported by the relevant shipping bills or other material, and there was no evidence that Modvat credit had actually been taken. As the failure to verify the exemption condition was attributable to the Department's own omission, the burden to justify extended limitation and denial of the exemption was not discharged, and the demand was unsustainable.

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Issues: Whether duty could be demanded by invoking the extended period of limitation under the proviso to Section 27(1) of the Customs Act, 1962 on the allegation that the importer had wrongly declared non-availment of Modvat credit so as to deny the benefit of Notification No. 203/92-Cus.

Analysis: The notice invoking the extended period was founded on an alleged wrong declaration in the shipping bill, but the allegation was not substantiated by enclosing the relevant shipping bills or any other supporting material. The failure to verify the condition attached to the exemption notification was attributable to the Department's own omission in processing the import documents, and not to any suppression or misstatement by the importer. There was also no evidence that Modvat credit had in fact been availed of. In these circumstances, the burden to justify invocation of the extended period and denial of the exemption was not discharged by the Department.

Conclusion: The demand could not be sustained under the extended period of limitation, and the denial of exemption failed; the finding is in favour of the assessee.

Final Conclusion: The appellate order was set aside and the importer retained the benefit of the exemption, as the demand was not legally sustainable.

Ratio Decidendi: The extended period of limitation cannot be invoked to deny an exemption unless the Department proves the factual basis for suppression, misstatement, or other qualifying conduct, and the burden of such proof lies on the Department.

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