Deemed credit cannot be denied absent wilful suppression when the department already knew the relevant manufacturing facts.

Deemed credit could not be denied on the basis of wilful suppression where the assessee had disclosed its manufacturing activity and its position that it was not an independent processor. The department was already aware of the relevant facts, including production of knitted fabric and the change in duty-payment basis, so suppression was not established. Once that foundation failed, the denial of deemed credit also failed. The issue was decided in favour of the assessee.

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Issues: Whether the assessee was entitled to deemed credit and whether denial of such credit on the ground of suppression of facts was justified.

Analysis: The assessee had informed the department about its manufacturing activity and its stand that it was not an independent processor. The record showed that the department was aware of the relevant facts, including the production of knitted fabric and the change in the basis of duty payment. In these circumstances, the allegation of wilful suppression could not be sustained. Once suppression was not established, the basis for denying deemed credit also failed.

Conclusion: The denial of deemed credit was not justified. The issue is decided in favour of the assessee.

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