CENVAT credit on 100% EOU supplies must follow the prescribed duty-equivalence method; extended limitation fails without suppression.

CENVAT credit on inputs supplied by a 100% EOU must be recomputed by applying the prescribed method: the admissible credit is limited to the duty equivalent determined with reference to the additional duty of customs on like imported goods and the duty actually paid by the EOU. Because the lower authority had not applied that method, the credit quantum required fresh quantification by the adjudicating authority. On limitation, the assessee's bona fide belief, supported by a Tribunal decision, meant suppression with intent to evade duty was not established, so only the normal period of limitation could be used and the extended period was unavailable.

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Issues: (i) whether CENVAT credit taken on inputs supplied by a 100% EOU was admissible in the quantum claimed, and (ii) whether the extended period of limitation was available to the department.

Issue (i): whether CENVAT credit taken on inputs supplied by a 100% EOU was admissible in the quantum claimed.

Analysis: Credit on inputs supplied by a 100% EOU had to be worked out by applying the method laid down in the larger Bench decision, namely by ascertaining the additional duty of customs leviable on like imported goods and the actual duty paid by the EOU, and then restricting credit to the duty equivalent under the relevant notification. The lower appellate authority had not applied this method, so the exact admissible credit required fresh determination by the adjudicating authority.

Conclusion: The question of admissible credit was not finally decided and was remitted for fresh quantification in accordance with law.

Issue (ii): whether the extended period of limitation was available to the department.

Analysis: The record showed that the assessee had taken credit under a bona fide belief that the benefit was available, supported by a Tribunal decision relied upon by them. In those circumstances, suppression with intent to evade duty was not established, and only the normal period of limitation could be applied for requantification.

Conclusion: The extended period of limitation was not available to the department.

Final Conclusion: The matter was sent back for fresh determination of the credit payable, but only within the normal period of limitation, while the demand beyond that period could not survive.

Ratio Decidendi: Where credit on goods supplied by a 100% EOU is governed by a restrictive notification, the admissible amount must be recomputed by the adjudicating authority on the prescribed statutory method, and the extended limitation period cannot be invoked absent suppression with intent to evade duty when the assessee acted under a bona fide belief.

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