Extended limitation and penalty fail where used capital goods were cleared without a duty reversal obligation under the then-applicable law.

For the period in question, clearance of used capital goods did not attract a duty reversal obligation or adverse Cenvat credit consequences, and a later amendment requiring reversal on depreciated value could not operate retrospectively. The show cause notice also failed to specifically allege suppression of facts with intent to evade duty, so the extended limitation period and Section 11AC penalty were not sustainable. The excess duty payment was explained as arising from the differential rate applicable at clearance, leaving no basis for the demand or penalty.

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Issues: Whether the extended period of limitation and penalty under Section 11AC could be invoked in respect of excess duty paid on removal of used capital goods, and whether the assessee was liable to reverse credit or suffer adverse consequences for such payment.

Analysis: The show cause notice did not specifically allege suppression of facts with intent to evade duty. The finding that the longer period was not invocable was accepted. On the substantive levy, the relevant legal position for the period in question was that there was no obligation to pay duty or reverse Cenvat credit on clearance of used capital goods, and the subsequent amendment requiring reversal on depreciated value could not operate retrospectively. The excess duty payment was also explained as arising from the differential rate prevailing at clearance. In these circumstances, there was no basis for penalty or demand of the alleged excess duty.

Conclusion: The invocation of the extended period and the penalty was unsustainable, and the Revenue's challenge was rejected.

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