Limitation plea omitted from final order held rectifiable; extended period and penalty failed in a bona fide classification dispute.

A specifically raised plea of limitation that was not discussed in the final order constituted a mistake apparent from the record and was capable of rectification under Section 35C(2) of the Central Excise Act, 1944. On the merits, the extended period of limitation could not be invoked where the department was already aware of the assessee's activity and the dispute concerned classification in a bona fide contest without suppression or wilful misstatement. Because the penalty rested on the same foundation, it also could not survive. The rectification application was allowed and the demand and penalty were set aside on limitation grounds.

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Issues: (i) Whether omission to consider the specifically raised plea of limitation in the final order constituted a mistake apparent from the record warranting rectification. (ii) Whether the demand could be sustained by invoking the extended period of limitation and the consequential penalty.

Issue (i): Whether omission to consider the specifically raised plea of limitation in the final order constituted a mistake apparent from the record warranting rectification.

Analysis: The plea of limitation had been expressly raised in the appeal and during hearing, but the final order contained no discussion or finding on that issue. A ground specifically urged and left undecided is a rectifiable mistake, and such omission falls within the scope of rectification under Section 35C(2) of the Central Excise Act, 1944.

Conclusion: Yes. The omission amounted to a mistake apparent from the record and was liable to be rectified.

Issue (ii): Whether the demand could be sustained by invoking the extended period of limitation and the consequential penalty.

Analysis: The department was already aware of the assessee's activity through an earlier notice and search, and the dispute related to classification remained unsettled for a considerable period. In such circumstances, suppression or wilful misstatement with intent to evade could not be attributed to the assessee. The extended period was therefore unavailable, and the penalty, being dependent on the same foundation, could not survive.

Conclusion: No. The extended period was not invocable and the penalty was unsustainable.

Final Conclusion: The rectification application was allowed, the omitted limitation plea was taken into account, and the demand and penalty were set aside on limitation grounds.

Ratio Decidendi: Where a specifically raised ground is not considered in the final order, the omission constitutes a mistake apparent from the record; and the extended period of limitation cannot be invoked in the absence of suppression or intent to evade in a bona fide classification dispute.

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