Limitation and show-cause notice scope bar excise demand where suppression is not pleaded and clandestine removal is unproved.

A demand for alleged unaccounted consumption of inputs was held unsustainable because the notice was issued beyond the normal limitation period and contained no allegation of suppression or wilful misstatement. Section 11A of the Central Excise Act applied through the relevant credit rules, so the extended period could not be invoked without those pleaded facts. The record also did not establish clandestine removal of inputs, finished goods, or scrap. Relief could not be sustained on grounds not set out in the show cause notice, and the demand and penalty were set aside.

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Issues: Whether the demand for unaccounted consumption of inputs was barred by limitation under the applicable credit rules and excise law, and whether the authorities could sustain demand and penalty on grounds not pleaded in the show cause notice.

Analysis: The demand related to a period ending in March 2004, while the notice was issued in December 2005. The applicable rule made Section 11A of the Central Excise Act, 1944 applicable, and no allegation of suppression or wilful misstatement was made in the notice. In the absence of such allegations, the extended period could not be invoked. The record also did not establish clandestine removal of inputs, finished goods, or scrap. The authorities below also proceeded beyond the scope of the show cause notice.

Conclusion: The demand was time-barred and unsustainable, and the order of the Commissioner (Appeals) was set aside in favour of the assessee.

Ratio Decidendi: Where the notice contains no allegation of suppression or wilful misstatement, a demand cannot be sustained beyond the normal limitation period, and relief cannot be founded on grounds not set out in the show cause notice.

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