Concessional duty on moped tyres and limitation bar upheld where buyers' later misuse and departmental knowledge defeated the demand.

Concessional duty was upheld for tyres cleared and declared as moped tyres because subsequent buyer use in some kick-start vehicles could not convert the manufacturer's product into motorcycle tyres. The record showed the goods were described and classified as moped tyres, and the department did not establish intentional misdescription. On limitation, the extended period was unavailable because the department had knowledge of the relevant facts, continued approving classification lists, and did not prove wilful suppression or misstatement. The demand, penalty, and interest were therefore set aside.

---

---

Issues: (i) Whether the tyres cleared by the assessee were wrongly treated as motorcycle tyres so as to deny the concessional rate available to moped tyres under the exemption notifications; (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether the tyres cleared by the assessee were wrongly treated as motorcycle tyres so as to deny the concessional rate available to moped tyres under the exemption notifications.

Analysis: The tyres were admittedly cleared after classification declarations and were marked as "moped" tyres with the maximum speed indicated. The question was whether subsequent use by buyers in some kick-start vehicles could convert the manufacturer's product into motorcycle tyres. The record showed that mopeds are light two-wheeled vehicles with small engine capacity, and the presence of kick-start facility did not by itself make the vehicle a motorcycle. The assessee could not be made liable for misuse by buyers, especially when the goods were clearly described and cleared as moped tyres. The department also failed to establish that the assessee had intentionally misdescribed the product.

Conclusion: The assessee was entitled to the concessional rate and the finding of misdeclaration was unsustainable.

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

Analysis: The unit was under physical control for part of the relevant period, and the department had knowledge of the material facts by 1994, yet continued to approve classification lists even thereafter. In such circumstances, wilful suppression or misstatement necessary for the extended period was not established. The department's own approvals showed that the facts were within its knowledge, defeating the allegation of suppression for invoking the larger period.

Conclusion: The extended period of limitation was not available and the demand was time-barred.

Final Conclusion: The demand, penalty, and interest were set aside and the assessee succeeded on merits as well as on limitation.

Ratio Decidendi: A manufacturer cannot be denied concessional duty on the basis of buyers' subsequent misuse of clearly identified goods, and the extended period cannot be invoked unless wilful suppression or misstatement by the assessee is established despite departmental knowledge of the relevant facts.

---