Extended limitation cannot be invoked where a bona fide belief based on favourable Tribunal precedent supports the assessee's tax position.

A reasonable bona fide belief, supported by a favourable Tribunal view on the tax treatment of free supplied items treated as quantity discount, barred invocation of the extended period of limitation. On that basis, the penalty also could not be sustained. The duty demand was therefore required to be examined only within the normal period, and the matter was remanded for re-quantification of duty within limitation.

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Issues: Whether the extended period of limitation could be invoked in respect of the demand arising from free supplied items treated as quantity discount, and whether the penalty could be sustained.

Analysis: The appellants had earlier been granted relief on penalty in the same matter on the basis of a Tribunal view favourable to the assessee, which was considered sufficient to support a reasonable bona fide belief regarding the tax treatment of the free supplied items. In that background, the case did not justify invocation of the longer limitation period. Since the demand had to be examined within the normal period, the matter was sent back to the Original Adjudicating Authority for re-quantification of duty within limitation.

Conclusion: The extended period of limitation was held not invocable, the penalty was set aside, and the matter was remanded for re-quantification of the duty demand within limitation.

Final Conclusion: The assessee succeeded on limitation and penalty, while the duty demand was left to be worked out afresh within the permissible period.

Ratio Decidendi: Where an assessee acts under a reasonable bona fide belief supported by a favourable Tribunal view, the extended period of limitation is not invocable and penalty cannot be sustained on that basis.

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