Extended limitation not invocable for bona fide exemption claim based on project authority certificates later withdrawn

Exemption under Notification No. 108/95, claimed on certificates issued by the Project Implementing Authority and furnished to the revenue, could not sustain extended limitation where the assessee acted bona fide and there was no suppression. The later withdrawal of the certificates did not, by itself, justify alleging fraud or suppression for the past period when the departmental authorities had not disputed the relevant status at the time. The Tribunal held that the department should have acted within the normal limitation period or resorted to provisional assessment, and the extended period was therefore not invocable. Demand, interest and penalty were set aside.

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Issues: Whether the demand, interest and penalty could be sustained by invoking the extended period of limitation when the exemption under Notification No. 108/95 was availed on the basis of certificates issued by the Project Implementing Authority and later withdrawn.

Analysis: The exemption had been claimed on the strength of certificates issued by the Project Implementing Authority, which were also furnished to the revenue authorities. The assessee acted on that basis bona fide, and the departmental authorities did not dispute the status of the financing organisation at the relevant time. Following the earlier Tribunal view on similar facts, the department could have taken steps within the normal limitation period or adopted provisional assessment, but having failed to do so, it could not later fasten fraud or suppression on the assessee merely because the certificates were subsequently withdrawn.

Conclusion: The extended period of limitation was not invocable, and the demand, interest and penalty were set aside in favour of the assessee.

Ratio Decidendi: Where exemption is availed on the basis of certificates issued by the competent project authority and the assessee acts bona fide without suppression, a subsequent withdrawal of the certificates does not by itself justify invocation of the extended period or penalty for the past period.

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