Bona fide reliance on prevailing valuation law barred extended limitation and rendered the duty demand time-barred.

Bona fide reliance on the prevailing Supreme Court ruling in Bata India on assessable value for exemption purposes can defeat invocation of the extended limitation period. The Tribunal accepted that the assessee could reasonably believe, on that legal position, that duty element had to be deducted while computing the exemption limit under the notification. Because that belief negated any basis for alleging suppression or similar grounds for extended limitation, the notice issued beyond the normal period could not sustain the duty demand, and the demand was set aside as time-barred.

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Issues: Whether the demand of duty was barred by limitation on the footing that the assessee could entertain a bona fide belief, based on the prevailing Supreme Court ruling, that the assessable value had to be determined after deducting the duty element while reckoning the exemption limit under the relevant notification.

Analysis: The Tribunal accepted that the then-existing law, as laid down by the Supreme Court in Bata India, governed the assessee's understanding of assessable value for exemption purposes. On that basis, the assessee could reasonably believe that the clearances fell within the exemption limit. The Tribunal held that this bona fide belief negatived the Revenue's attempt to invoke the extended period, and the notice issued beyond the normal period of limitation could not sustain the demand.

Conclusion: The demand was held to be time-barred and was set aside in favour of the assessee.

Ratio Decidendi: Where the prevailing legal position supports the assessee's bona fide understanding of valuation for exemption purposes, the Revenue cannot invoke the extended period of limitation merely on that basis.

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