Extended limitation fails where records disclosed the facts, and the related Section 11AC penalty cannot survive.

Where the alleged mis-utilisation of Modvat credit was already reflected in RG 23 Part-II registers and there was no concealment, suppression, or failure to disclose material facts, the extended period of limitation could not be invoked; the duty demand was therefore time-barred and unsustainable. As the demand itself failed on limitation, the related allegation of misstatement and evasion could not survive, so penalty under Section 11AC of the Central Excise Act, 1944 was also not sustainable. The appeal succeeded and the demand and penalty were set aside with consequential relief.

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Issues: (i) Whether the duty demand for alleged mis-utilisation of Modvat credit was barred by limitation. (ii) Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable.

Issue (i): Whether the duty demand for alleged mis-utilisation of Modvat credit was barred by limitation.

Analysis: The demand related to a period ending in May 1994, while the show cause notice was issued in June 1998. The relied upon RG 23 Part-II registers already disclosed the relevant entries, and there was no allegation or finding that material information had been concealed or not furnished as required. On these facts, invocation of the extended period was not justified.

Conclusion: The duty demand was time-barred and unsustainable.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: Once the demand itself failed on limitation, the allegation of misstatement and consequent evasion could not be sustained on the record.

Conclusion: The penalty under Section 11AC could not be sustained.

Final Conclusion: The appeal succeeded, and the duty demand and penalty were set aside with consequential relief.

Ratio Decidendi: Where the relevant facts are already available from departmental records and there is no concealment or suppression, the extended period of limitation cannot be invoked, and a penalty contingent on sustainable duty liability cannot stand.

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