Extended limitation and new classification claims fail when facts were known and the demand departs from the show cause notice.

Extended limitation could not be invoked where the department was already aware of the material facts, relevant documents had been furnished, and no reliable basis existed to allege deliberate suppression with intent to evade duty. A demand sustained on a tariff heading different from the one proposed in the show cause notice was impermissible because it introduced a new case without notice. Once the duty demands failed on limitation and jurisdictional grounds, the connected penalties and interest also fell, as they were purely consequential.

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Issues: (i) Whether the demands confirmed for the disputed classifications and valuations were barred by limitation and whether suppression of facts with intent to evade duty was made out; (ii) Whether an adjudication could sustain demand on a tariff heading different from that proposed in the show cause notice; (iii) Whether penalties and interest could survive once the duty demands were held unsustainable.

Issue (i): Whether the demands confirmed for the disputed classifications and valuations were barred by limitation and whether suppression of facts with intent to evade duty was made out.

Analysis: The disputed demands arose in a setting of differing departmental views on classification and valuation. In respect of the adhesive vinyl stickers, the relevant documents had been furnished to the officers after search, and the department was already aware of the material facts. As regards the fascia and other items, the record showed prior departmental action, earlier acceptance of classification by the Assistant Commissioner, and absence of reliable basis for alleging deliberate suppression. In such circumstances, the extended period could not be invoked.

Conclusion: The demand was time-barred and the allegation of suppression with intent to evade duty was not established.

Issue (ii): Whether an adjudication could sustain demand on a tariff heading different from that proposed in the show cause notice.

Analysis: The show cause notice proposed classification under one chapter, whereas the adjudication order proceeded on a different chapter for the same item. A demand founded on a new classification not put to notice amounts to making out a new case, which is impermissible. The classification dispute itself also showed conflicting departmental interpretations, which further negatived the basis for invoking the longer limitation period.

Conclusion: The demand confirmed on the basis of a classification beyond the show cause notice was unsustainable.

Issue (iii): Whether penalties and interest could survive once the duty demands were held unsustainable.

Analysis: The penalties and interest were consequential to the duty demands. Once the confirmed demands were found to be unsustainable on limitation and jurisdictional grounds, there remained no foundation for penal or interest liability.

Conclusion: The penalties and interest were not sustainable.

Final Conclusion: The impugned duty demands and the connected penalties were set aside in full, and the appeals succeeded with consequential relief.

Ratio Decidendi: Where the department is aware of the material facts and the dispute turns on competing classifications, the extended period for recovery cannot be invoked on the basis of suppression, and a demand cannot be sustained on a classification not proposed in the show cause notice.

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