Extended limitation under central excise law fails where disclosure is complete and classification is pursued in bona fide reliance on clarification.

Extended limitation under the proviso to Section 11A of the Central Excise Act was unavailable absent suppression, wilful misstatement or misdeclaration. The assessee had disclosed the relevant facts, changed classification after obtaining clarification, and relied on customs treatment of similar goods under another chapter. On those facts, the High Court treated the classification dispute as a bona fide difference and held that the assessee's claim could not be equated with suppression. The finding on suppression was essentially factual, so no substantial question of law arose. The demand was confined to the normal period and the penalties were set aside.

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Issues: Whether the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 could be invoked in the absence of suppression, wilful misstatement or misdeclaration by the assessee, and whether the consequential penalties could be sustained.

Analysis: The assessee had initially classified the yarn under Chapter 54 but later changed classification after obtaining clarification and in view of the Customs authorities clearing similar goods under Chapter 56. The Tribunal found, on appreciation of the evidence, that the assessee had placed all relevant facts before the department and had not mis-declared the description or manufacturing process. The High Court held that, on these facts, the assessee's claim of classification under Chapter 56 could not be equated with suppression or misdeclaration. Since whether there was suppression or misstatement was essentially a question of fact, no substantial question of law arose from the Tribunal's finding.

Conclusion: The extended period of limitation was not invocable, and the Tribunal was justified in restricting the demand to the normal period and in setting aside the penalties. The appeals were dismissed.

Ratio Decidendi: Where the assessee has disclosed the relevant facts and acts under a bona fide belief based on departmental or customs clarification, invocation of the extended period requires proof of suppression, wilful misstatement or misdeclaration, which is essentially factual.

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