Bona fide classification dispute: full disclosure in records defeated suppression and barred extended limitation, with penalty set aside.

In a bona fide classification dispute, full disclosure of the raw material and final product in declarations, returns, import documents, audit records and clearance records negated any allegation of suppression of facts or wilful misstatement. The mere adoption of one classification by the assessee, when material facts were already before the Department, was insufficient to invoke the extended period of limitation. On the facts, the ingredients for extended limitation were not established, so the extended-period demand was unsustainable. The penalty was set aside, and the demand with interest was confined to the normal period of limitation.

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Issues: Whether the demand could be sustained for the extended period on the allegation of suppression of facts and wilful misstatement in a classification dispute.

Analysis: The only issue pressed was limitation. The disclosures made in declarations, returns, import documents, audit records, and clearance records showed that the nature of the raw material and the final product had been disclosed to the Department over a long period. The dispute was one of classification, and the mere adoption of one classification by the assessee did not, by itself, establish suppression or wilful misstatement when the material facts were otherwise on record. On the facts, the ingredients necessary to invoke the extended period were not made out.

Conclusion: The demand for the extended period was not sustainable. The penalty was also set aside, and the demand with interest was confined to the normal period of limitation in favour of the assessee.

Ratio Decidendi: In a bona fide classification dispute, full disclosure of material facts in statutory records and departmental filings does not amount to suppression of facts or wilful misstatement so as to justify invocation of the extended period of limitation.

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