Deemed Cenvat credit on opening scrap stock denied where contemporaneous verification disproved duty-paid eligibility and extended limitation applied.

Deemed Cenvat credit on opening scrap stock was denied because contemporaneous stock verification showed a sharp mismatch between the declared quantity and the stock actually found, which consisted of old and used iron and steel articles purchased from scrap dealers rather than duty-paid manufacturing scrap. The assessee failed to prove entitlement on reliable evidence, so the credit claim failed. On limitation, a false declaration about the quantity and nature of the stock and the absence of bona fide disclosure justified invocation of the extended period, so the demand was not time-barred. The order sustaining denial of credit, interest and penalty was upheld.

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Issues: (i) Whether deemed Cenvat credit on scrap lying in stock on 1-4-2000 was admissible on the facts proved; (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether deemed Cenvat credit on scrap lying in stock on 1-4-2000 was admissible on the facts proved.

Analysis: The stock verification showed a sharp disparity between the quantity declared and the quantity physically found. The verified stock was about 70 MT and consisted of old and used iron and steel articles purchased from scrap dealers, not duty paid manufacturing scrap. The later report relied upon by the appellant did not displace the contemporaneous verification of the stock relevant to the notification date. On the evidence, the appellant failed to establish entitlement to deemed credit on the claimed quantity.

Conclusion: The deemed Cenvat credit was rightly denied, and the finding is against the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The appellant made a false claim as to the quantity and nature of the scrap available on the relevant date, and the conduct during verification did not support bona fide disclosure. The circumstances justified invocation of the extended period, and the time-bar plea did not survive.

Conclusion: The demand was not time-barred and the extended period was correctly invoked, against the assessee.

Final Conclusion: The order affirming denial of deemed credit and sustaining the demand, interest, and penalty was upheld, so the appeal failed.

Ratio Decidendi: Deemed credit on opening stock is available only for duty paid eligible goods proved by reliable contemporaneous verification, and a false declaration as to quantity or nature of stock justifies the extended limitation period.

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