Extended limitation and penalty fail where law was unsettled or favoured the assessee; only the normal-period demand survived for quantification.

Extended limitation could not be invoked where, during the relevant period, higher judicial forums had already interpreted the law in favour of the assessee, so suppression or wilful misstatement was not established. The demand raised beyond the normal limitation period therefore failed, and the related penalty was also unsustainable. A portion of the duty liability was nevertheless found to fall within the normal limitation period, so the matter was remanded only for fresh quantification of that surviving demand.

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Issues: (i) Whether the longer period of limitation could be invoked for the demand and the related penalty could be sustained; (ii) Whether the matter required remand for quantification of the demand falling within the normal limitation period.

Issue (i): Whether the longer period of limitation could be invoked for the demand and the related penalty could be sustained.

Analysis: The dispute concerned credit taken on furnace oil used for generation of electricity, part of which was diverted to the residential colony. The appellant did not contest the demand on merits, but relied on contemporaneous decisions in favour of the assessee to contend that no suppression or wilful misstatement could be alleged. It was noted that, where higher judicial forums had interpreted the law in favour of the assessee during the relevant period, invocation of the extended period was not justified. On that basis, the penalty linked to the extended demand was also unsustainable.

Conclusion: The longer period of limitation was not available to the Revenue, and the penalty was set aside.

Issue (ii): Whether the matter required remand for quantification of the demand falling within the normal limitation period.

Analysis: Although the extended demand could not survive, it was accepted that a part of the duty demand would fall within the limitation period. The Tribunal therefore found it necessary to remand the matter only for working out the surviving liability to that limited extent.

Conclusion: The matter was remanded for quantification of the demand within limitation.

Final Conclusion: The demand could not be sustained for the extended period, the penalty was deleted, and only the surviving portion within limitation was sent back for fresh quantification.

Ratio Decidendi: Where the law was unsettled or had been interpreted in favour of the assessee during the relevant period, extended limitation cannot be invoked on the ground of suppression or misstatement, and consequential penalty cannot be sustained.

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