Extended limitation and penalty fail where bona fide belief and disclosure negate wilful suppression in granite processing dispute.

Divergent views on whether cutting and polishing granite amounted to manufacture supported the assessee's bona fide belief, and the assessee had filed declarations, maintained records, and relied on a District Industrial Officer certificate. On those facts, deliberate non-disclosure with intent to evade duty was not proved, so wilful suppression could not be invoked to extend limitation. The demand beyond six months was therefore time-barred, and the penalty also failed because it depended on the unsustained extended-period demand.

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Issues: Whether the extended period of limitation could be invoked on the basis of wilful suppression, and whether the penalty could be sustained.

Analysis: The existence of divergent views on whether cutting and polishing granite amounted to manufacture supported the assessee's bona fide belief. The assessee had also filed declarations, maintained records, and relied on a certificate from the District Industrial Officer regarding the value of plant and machinery. On these facts, the requisite element of deliberate non-disclosure with intent to evade duty was not established. As the demand beyond six months depended on proof of wilful suppression, the extended period could not be applied. Once the demand for the extended period failed, the penalty also could not survive.

Conclusion: The extended period of limitation was not invocable against the assessee, the demand beyond six months was barred by limitation, and the penalty was set aside.

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