Limitation and show cause notice scope: demand failed for no suppression and findings beyond the notice were unsustainable.

A demand was held time-barred where the records showed the relevant facts and there was no suppression to justify the extended limitation period. The show cause notice also failed to support the longer period, so the notice issued beyond the normal period could not be sustained. Findings on irregular Cenvat credit were likewise rejected because the appellate reasoning travelled beyond the notice: the notice alleged wrongful credit on vehicles returned after testing, but the later finding rested on a different characterisation of the goods as worn-out parts and junk. The order confirming the demand was set aside and consequential relief followed.

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Issues: (i) Whether the demand was barred by limitation in the absence of suppression of facts; (ii) whether the impugned findings sustaining irregular availment of Cenvat credit could be upheld when they travelled beyond the allegations in the show cause notice.

Issue (i): Whether the demand was barred by limitation in the absence of suppression of facts.

Analysis: The vehicles were sent for statutory testing and the relevant facts were reflected in the records. The show cause notice did not disclose when the audit had examined the records. On the material available, there was no suppression of facts to justify invocation of the longer period, and the notice issued after the relevant period was held to be time-barred.

Conclusion: The demand was barred by limitation and the assessee succeeded on this issue.

Issue (ii): Whether the impugned findings sustaining irregular availment of Cenvat credit could be upheld when they travelled beyond the allegations in the show cause notice.

Analysis: The notice proceeded on the footing that credit was wrongly availed on vehicles returned after testing under Rule 16 of the Central Excise Rules. The appellate finding, however, introduced a different basis by treating the returned vehicles as worn-out parts and junk. Such a conclusion was not covered by the notice and could not sustain the demand. The invoices and records also supported the assessee's stand that the vehicles were received, credited and later cleared on payment of duty in the prescribed manner.

Conclusion: The adverse findings on irregular Cenvat credit could not be sustained.

Final Conclusion: The order confirming the demand was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: A demand cannot be sustained where the notice is time-barred for want of suppression and the adjudicating or appellate finding is based on a ground not alleged in the show cause notice.

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