Blended yarn classification and limitation under Section 11A turned on test reports and absence of suppression.

Blended yarn classification turned on test results showing polyester content above 70%, leading to classification under sub-heading 5504.29. On limitation, the extended period under the proviso to Section 11A was held unavailable because the record did not establish fraud, collusion, suppression of facts, or deliberate intent to evade duty. The demand beyond six months was therefore barred, and the penalty was set aside. The result confined duty liability to the normal limitation period while sustaining the higher tariff classification.

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Issues: (i) whether the blended yarn was classifiable under sub-heading 5504.22 or sub-heading 5504.29; (ii) whether the demand could be extended beyond six months under the proviso to Section 11A and whether penalty was sustainable.

Issue (i): whether the blended yarn was classifiable under sub-heading 5504.22 or sub-heading 5504.29.

Analysis: Three departmental test reports were on record showing varying percentages of polyester and viscose content in the yarn. The majority view accepted the departmental samples and took the average of the test results. On that basis, the polyester content was found to be more than 70%, which brought the goods within the higher tariff entry.

Conclusion: The yarn was held classifiable under sub-heading 5504.29, against the assessee.

Issue (ii): whether the demand could be extended beyond six months under the proviso to Section 11A and whether penalty was sustainable.

Analysis: The variation in the test reports created doubt on the precise composition declared by the assessee. The majority held that the circumstances did not establish fraud, collusion, suppression of facts, or a deliberate intent to evade duty. In such a situation, the exceptional extended period under the proviso to Section 11A could not be invoked, and the benefit of doubt had to be extended to the assessee.

Conclusion: The demand beyond six months was barred by limitation and the penalty was set aside, in favour of the assessee.

Final Conclusion: The classification issue was decided in favour of the revenue, but the limitation and penalty issues were decided in favour of the assessee, resulting in restriction of duty demand to the normal period only.

Ratio Decidendi: The extended limitation under the proviso to Section 11A can be invoked only when fraud, collusion, suppression of facts, or deliberate intent to evade duty is established; where the evidence shows uncertainty in composition and no such intent, the normal limitation applies.

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