Natural justice and extended limitation in suppression cases: denial of retesting did not defeat the demand or bar recovery.

SC held that denial of retesting and non-supply of shipping bills did not amount to breach of natural justice where misstatement and suppression were already established through the Chemical Examiner's report and the assessee had been given an opportunity to cross-examine the examiner but did not use it. The shipping bills were not decisive once the sample test report had been supplied. The Court also held that proved suppression justified invocation of the extended period of limitation, so the demand was not time-barred. The Tribunal's contrary view was set aside, and the Commissioner's adjudication, including confiscation and penalty, was restored.

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Issues: (i) Whether denial of retesting of samples and non-supply of shipping bills amounted to violation of principles of natural justice; (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether denial of retesting of samples and non-supply of shipping bills amounted to violation of principles of natural justice.

Analysis: The charge of misstatement and suppression regarding the quality and grade of the input had been established on the basis of the Chemical Examiner's report. The respondent had been offered an opportunity to cross-examine the Chemical Examiner, but did not avail it. In that setting, the refusal to order retesting did not prejudice the respondent. The shipping bills were not decisive once the test report on the samples drawn from the consignments had been supplied. The Tribunal's reliance on these two grounds to hold breach of natural justice was unsustainable.

Conclusion: The finding of violation of principles of natural justice was set aside and the issue was decided against the respondent.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: Since misstatement and suppression had been established, the demand could not be treated as time barred merely because the test report had been received earlier than the show cause notice. The Tribunal's reliance on a case where suppression had not been proved was misplaced and had no application to the present facts.

Conclusion: The extended period of limitation was held available and the limitation objection failed.

Final Conclusion: The order of the Tribunal was displaced and the Commissioner's adjudication, including confiscation and penalty, was restored, resulting in success for the Revenue.

Ratio Decidendi: Where the assessee is afforded an effective opportunity to challenge the chemical test, the denial of retesting does not by itself establish breach of natural justice, and proved misdeclaration or suppression justifies invocation of the extended period of limitation.

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