Limitation on show cause notice for exempted clearances upheld where monthly returns disclosed nil duty and no prior departmental query was made.

A show cause notice demanding 8% of the value of exempted goods cleared on common inputs was held time-barred. Although the notice followed an audit objection, the assessee had filed monthly returns showing clearances at nil rate of duty, and the record showed no prior departmental query or correspondence seeking an explanation for those clearances. On that factual basis, the notice could not be sustained beyond the normal limitation period, and the demand was therefore barred by limitation.

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Issues: Whether the show cause notice demanding 8% of the value of exempted goods cleared on common inputs was barred by limitation.

Analysis: The notice arose from an audit objection, but the assessee had filed monthly returns showing clearances at nil rate of duty. The record did not show any prior query or correspondence from the department seeking an explanation regarding such clearances. In these circumstances, the omission to act within the relevant period could not justify invocation of limitation beyond the normal period, and the demand was rightly held to be time-barred.

Conclusion: The demand was barred by limitation and the Revenue's challenge failed.

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