Approved classification list and lack of suppression sustained classification as base filter paper and defeated the demand.

Classification of filter paper depended on whether the goods were recognised as base filter paper or a distinct craped filter paper. The approved classification list, accepted after enquiry, and the absence of market enquiry, technical literature, or other objective material meant the department failed to displace the declared classification; sub-heading 4805.20 was therefore treated as correct. On limitation, the approved list, full disclosure of the goods, and manufacturing details showed no suppression of facts or misdeclaration, so the demand and penalty were not sustainable and the time-bar objection succeeded.

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Issues: (i) whether the impugned goods were classifiable as base filter paper under sub-heading 4805.20 or as craped filter paper under sub-heading 4805.90; (ii) whether the demand was sustainable in the absence of suppression or misdeclaration and in view of the approved classification list.

Issue (i): Whether the impugned goods were classifiable as base filter paper under sub-heading 4805.20 or as craped filter paper under sub-heading 4805.90.

Analysis: The description in the classification list covered the goods as base filter paper and the department had accepted the list after due enquiry. No market enquiry, technical literature, or other material was produced to show that the product was known to trade as a distinct commodity different from base filter paper. The later approved classification lists also treated the same product as base filter paper, supporting the assessee's understanding of the goods.

Conclusion: The classification under sub-heading 4805.20 was held to be correct, and the department failed to establish classification under sub-heading 4805.90.

Issue (ii): Whether the demand was sustainable in the absence of suppression or misdeclaration and in view of the approved classification list.

Analysis: The classification list had been approved, which gave rise to a presumption of due verification. The assessee had disclosed the goods in accordance with its bona fide understanding and had also furnished the manufacturing details. On these facts, the department failed to establish suppression of facts or misdeclaration so as to justify the demand and penalty.

Conclusion: The demand was not sustainable on the ground of suppression or misdeclaration, and the time-bar objection succeeded.

Final Conclusion: The impugned order was set aside and the appeal was allowed, while leaving the department free to take future action prospectively in accordance with law.

Ratio Decidendi: Where the department accepts an assessee's classification list after due enquiry, it must adduce evidence of trade understanding, market enquiry, or other objective material to displace the declared classification and to establish suppression or misdeclaration for invoking the extended demand period.

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