Limitation for Modvat credit demand fails where classification was fully disclosed and no suppression with intent to evade duty existed.

The demand for reversal of Modvat credit was time-barred because the assessee had disclosed the relevant classification lists, samples, labels and cartons, and the department had approved them on that material. The assessee's classification was based on a bona fide understanding of the prevailing legal position on patent or proprietary medicines, so suppression or misdeclaration with intent to evade duty could not be attributed. As a result, the extended period of limitation was unavailable, and the demand could only have been issued within the normal period. The issue was decided in favour of the assessee and against the revenue.

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Issues: Whether the demand for reversal of Modvat credit was barred by limitation on the ground that there was no suppression or misdeclaration by the assessee with intent to evade duty.

Analysis: The classification lists had been filed along with samples, labels, and cartons, and were approved by the department after consideration of the disclosed material. The assessee had proceeded on a bona fide understanding of the then prevailing legal position regarding classification of the products as patent or proprietary medicines. In these circumstances, the department could not attribute suppression or misdeclaration with intent to evade duty, and the extended period was not available. The demand, therefore, could only have been raised within the normal period.

Conclusion: The issue was decided in favour of the assessee and against the revenue; the entire demand was held to be barred by limitation.

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