Customs classification of gas meters and limits on extended limitation where only classification and exemption are disputed.

Imported meters used in custody transfer were treated as gas meters, not flow meters, because the brochure, product description and readings showed they measured the cumulative volume of gas supplied. On that basis, the goods were classifiable under CTI 9028 10 00 and not CTI 9026 10 10. The commentary also states that the extended period of limitation applies only where collusion, wilful misstatement or suppression of facts is shown; a mere classification dispute and exemption claim are insufficient, so extended limitation could not be invoked. Penalty under section 114A was likewise unsustainable because its ingredients were treated as coextensive with the extended-period conditions.

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Issues: (i) Whether the imported meters were classifiable under CTI 9026 10 10 or CTI 9028 10 00; (ii) Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 was rightly invoked; (iii) Whether penalty under section 114A of the Customs Act, 1962 was sustainable.

Issue (i): Whether the imported meters were classifiable under CTI 9026 10 10 or CTI 9028 10 00.

Analysis: The brochure, product description, customer profile and meter readings showed that the goods were meant to measure the cumulative volume of gas transferred or supplied in custody transfer arrangements. The meters were not meant merely to assess instantaneous flow rate or pressure. On that basis, the meters answered the description of gas meters and not flow meters.

Conclusion: The imported meters were correctly classifiable under CTI 9028 10 00 and not under CTI 9026 10 10; this issue was decided against the assessee.

Issue (ii): Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 was rightly invoked.

Analysis: Extended limitation required collusion, wilful misstatement or suppression of facts. The record showed disclosure of import documents and a dispute only on classification and exemption eligibility. Mere adoption of an incorrect classification and claim of exemption did not establish the ingredients necessary for invocation of the extended period.

Conclusion: Invocation of the extended period of limitation was not justified and the demand could not be sustained for the extended period; this issue was decided in favour of the assessee.

Issue (iii): Whether penalty under section 114A of the Customs Act, 1962 was sustainable.

Analysis: The ingredients for penalty under section 114A were treated as coextensive with those for invoking the extended period under section 28(4). Once the extended period failed, the penalty also could not survive.

Conclusion: Penalty under section 114A was set aside; this issue was decided in favour of the assessee.

Final Conclusion: The classification finding and the demand confined to the normal period were maintained, while the extended-period demand and the penalty were set aside, resulting in a partial grant of relief.

Ratio Decidendi: A dispute confined to incorrect classification and exemption claim, without evidence of collusion, wilful misstatement or suppression of facts, does not justify invocation of the extended period of limitation, and a penalty dependent on the same ingredients cannot survive.

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