Limitation bars a demand when the department already knew the relevant facts and failed to act in time.

A demand based on a show cause notice issued for an earlier period was held time-barred because the department already had knowledge of the relevant facts from an earlier audit and related proceedings involving a sister concern. On those facts, the failure to undertake timely investigation against the unit meant the notice could not be sustained within limitation. The Revenue's challenge was rejected, and the limitation objection was upheld as decisive.

---

---

Issues: Whether the demand was barred by limitation.

Analysis: The demand arose from a show cause notice issued on 23.03.2009 for the period 03/2006 to 12/2007. The Commissioner (Appeals) found that the department had knowledge of the relevant facts from an earlier audit and from proceedings involving a sister concern, yet no timely investigation was made against the respondent unit. On these facts, the finding that the notice was beyond limitation was upheld.

Conclusion: The demand was held to be time-barred, and the Revenue's appeal was rejected.

Ratio Decidendi: Where the department had prior knowledge of the material facts and failed to act within the prescribed period, a subsequent demand cannot be sustained as within limitation.

---