Extended limitation for Cenvat credit demand fails where revised returns withdraw depreciation claim and dual benefit is not proved.

Extended limitation for a Cenvat credit demand was found unavailable where the assessee had withdrawn an erroneous depreciation claim through revised income-tax returns and the record did not show intent to obtain a dual benefit. On those facts, the show cause notice could not validly rely on the longer limitation period, so the demand was time-barred. The revised returns also removed the basis for alleging simultaneous depreciation and excise credit on the same value, and the demand and penalty were held unsustainable on merits. Relief was therefore confirmed in favour of the assessee on both limitation and substantive grounds.

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Issues: (i) Whether the demand of irregular Cenvat credit could be raised by invoking the extended period of limitation in view of the assessee's claim of depreciation in income-tax returns and subsequent revised returns; (ii) whether the assessee was entitled to relief on merits from the demand and penalty imposed on the irregular credit.

Issue (i): Whether the demand of irregular Cenvat credit could be raised by invoking the extended period of limitation in view of the assessee's claim of depreciation in income-tax returns and subsequent revised returns.

Analysis: The assessee had withdrawn the depreciation claim by filing revised returns and the record did not establish any intention to derive dual benefit by simultaneously taking credit and claiming depreciation. The finding that the action was bona fide was not effectively displaced. In such circumstances, invocation of the longer limitation period for issuance of the show cause notice was not justified.

Conclusion: The extended period was not available and the demand was barred by limitation, in favour of the assessee.

Issue (ii): Whether the assessee was entitled to relief on merits from the demand and penalty imposed on the irregular credit.

Analysis: The revised returns showed withdrawal of the inadmissible depreciation claim, which removed the basis for alleging simultaneous enjoyment of depreciation and excise credit on the same value. On the facts found, the assessee's case was supported by precedent in a similar factual setting and the demand and penalty were not sustainable on merits.

Conclusion: Relief on merits was justified and the assessee succeeded on the cross-objection.

Final Conclusion: The demand and penalty were set aside, and the assessee obtained relief both on limitation and on merits.

Ratio Decidendi: Where an assessee voluntarily rectifies an erroneous depreciation claim and the revenue fails to establish intent to secure dual benefit, the extended period of limitation for duty demand cannot be invoked and the demand fails.

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