Extended limitation cannot apply when exempted clearances are disclosed in statutory returns and records, defeating suppression allegations.

Common inputs used for both dutiable and exempted clearances can attract a Rule 6 Cenvat Credit demand where credit was taken in respect of exempted goods, and the merits were found against the assessee in a prior similar matter. However, extended limitation was not available because monthly returns and statutory records disclosed the exempted clearances, duty-paid clearances, assessable value, and related details, giving the department access to the relevant facts. In the absence of suppression with intent to evade duty, the demand was held time-barred and the penalty could not survive, resulting in relief to the assessee.

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Issues: (i) whether, on merits, the appellant was liable to pay the amount demanded under Rule 6 of the Cenvat Credit Rules in respect of clearances made under Notification No. 16/2001; and (ii) whether the demand was barred by limitation on the allegation of suppression with intent to evade duty.

Issue (i): whether, on merits, the appellant was liable to pay the amount demanded under Rule 6 of the Cenvat Credit Rules in respect of clearances made under Notification No. 16/2001.

Analysis: The demand arose because common inputs on which credit had been taken were used in the manufacture of both dutiable and exempted goods. The Tribunal noted that the issue on merits had already been settled against the appellant by its earlier decision in a similar matter. In that view, the demand raised under the credit scheme for exempted clearances was not sustainable in the appellant's favour.

Conclusion: The issue was decided against the appellant.

Issue (ii): whether the demand was barred by limitation on the allegation of suppression with intent to evade duty.

Analysis: The show-cause notice was issued after the relevant period, but the appellant had been filing monthly returns and statutory records showing both duty-paid clearances and clearances under the exemption notification. The assessable value and related details were reflected in the returns, and the department had access to the relevant records. In these circumstances, the allegation of suppression with intent to evade duty was not sustained.

Conclusion: The demand was time-barred and the penalty could not survive.

Final Conclusion: The challenge on merits failed, but the demand and penalty were ultimately set aside on limitation, resulting in relief to the appellant.

Ratio Decidendi: Where the assessee's relevant clearances and records are disclosed in regular statutory returns and allied records, the extended limitation period cannot be invoked on a bare allegation of suppression with intent to evade duty.

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