Extended limitation and mixed exemption structure applied where non-disclosure was treated as suppression and exemption threshold was maintained.

Extended limitation was treated as invocable where the conversion of PVA powder into PVA solution was not disclosed, the omission being regarded as suppression of facts. The revenue-neutrality defence was rejected because the alleged credit advantage was not shown to accrue to the assessee in the required manner. The article also notes that a manufacturer may claim full exemption for one class of goods while paying concessional duty on another, and where aggregate clearances remain within the prescribed threshold, the exemption can still apply to the Chapter 39 product.

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Issues: (i) whether the demand was sustainable by invoking the extended period of limitation on the ground of suppression of facts and revenue neutrality; and (ii) whether the assessee could avail full exemption for one set of goods while paying concessional duty on other goods, so that the clearances of the job-work product remained within the exemption limit.

Issue (i): whether the demand was sustainable by invoking the extended period of limitation on the ground of suppression of facts and revenue neutrality

Analysis: The conversion of PVA powder into PVA solution was not disclosed to the department, and the non-disclosure was treated as suppression of facts. On that basis, the extended period of limitation was held to be invocable. The plea of revenue neutrality was rejected because the supposed credit advantage was not shown to accrue to the assessee itself in the manner required for such a defence.

Conclusion: The limitation challenge failed and the demand could not be set aside on the ground of revenue neutrality.

Issue (ii): whether the assessee could avail full exemption for one set of goods while paying concessional duty on other goods, so that the clearances of the job-work product remained within the exemption limit

Analysis: The clearances of the assessee's own goods and the job-work product were separately considered, and the cumulative value of clearances remained within the prescribed limit. Relying on the principle that a manufacturer may avail full exemption for one category of goods while paying duty on another category of goods, the exemption benefit was held to be available for the Chapter 39 product. The impugned demand was therefore unsustainable to the extent confirmed.

Conclusion: The assessee was entitled to the exemption benefit, and the confirmed demand and penalty were liable to be set aside.

Final Conclusion: The appeal succeeded, with consequential relief, because the assessee was entitled to the exemption structure claimed and the confirmed duty and penalty could not survive.

Ratio Decidendi: A manufacturer may lawfully combine full exemption for one class of goods with concessional duty on another class of goods, and where the aggregate clearances remain within the exemption threshold, the demand cannot be sustained against the assessee on that basis.

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