Product classification and limitation fail where composition is disclosed and the Department cannot prove plastic-based content or suppression.

Goods were classifiable as glues and adhesives other than those based on plastics because the assessee had disclosed the product composition, the approved classification list remained on record, and the later test report did not establish the percentage of synthetic needed to displace that classification. The higher rate could not be applied on the basis of incomplete material. The extended period of limitation and penalty also failed because there was no suppression or misstatement; the composition had been disclosed and the Department had no reliable basis to allege concealment. Differential duty and penalty were therefore unsustainable.

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Issues: (i) whether the goods were classifiable as glues and adhesives based on plastics so as to attract the higher rate under the exemption notification, or as glues and adhesives other than those based on plastics; (ii) whether the extended period of limitation and penalty were sustainable in the absence of suppression or misstatement.

Issue (i): whether the goods were classifiable as glues and adhesives based on plastics so as to attract the higher rate under the exemption notification, or as glues and adhesives other than those based on plastics.

Analysis: The classification list filed from the relevant date had been approved by the Department. The assessee had disclosed the product composition, showing chemically treated natural gum as the principal basis of the adhesive, with only limited quantities of tackifier resin and copolymer of ethylene vinyl acetate. The later chemical test report referred to the presence of ethylene vinyl acetate and synthetic resin, but did not state the percentage of such materials. In the absence of percentage details sufficient to displace the earlier approved classification, the Department had no basis to treat the product as based on plastics.

Conclusion: The goods were not shown to be based on plastics, and the lower rate applicable to adhesives other than those based on plastics applied.

Issue (ii): whether the extended period of limitation and penalty were sustainable in the absence of suppression or misstatement.

Analysis: The relevant composition had been disclosed to the Department, and there was no concealment of the presence of ethylene vinyl acetate or synthetic resin. Since the Department's own report did not establish any percentage composition justifying reclassification, the ingredients for invoking suppression or misstatement were absent. On that footing, the longer limitation period could not be applied, and the foundation for penalty also failed.

Conclusion: The extended period of limitation was not available and no penalty was imposable.

Final Conclusion: The demand for differential duty and the penalty were unsustainable, and the assessee obtained complete relief on the merits and limitation.

Ratio Decidendi: Where the assessee has disclosed the product composition and the Department fails to establish, by reliable material, that the goods fall within the higher-taxed category or that suppression occurred, reclassification, extended limitation, and penalty cannot be sustained.

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