Extended limitation cannot be invoked when disputed credit was already known to the department; time-barred demand was set aside.

Departmental knowledge of disputed CENVAT credit, reflected in audit and in the jurisdictional Range Officer's communication dated 16-7-98, prevented the later notice dated 5-4-2000 from invoking the extended period for the earlier credit dispute. On that basis, the demand of Rs. 1,61,079/- was treated as time-barred and the related penalty under Rule 57-I(4) of the Central Excise Rules, 1944 was set aside. The separate demand of Rs. 1,39,259/- and penalty of Rs. 25,000/- were sustained because that part of the order was not contested and no live dispute remained.

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Issues: (i) Whether the demand raised by the notice dated 5-4-2000 was barred by limitation and the penalty imposed in respect of that demand was sustainable; (ii) Whether the demand of Rs. 1,39,259/- and the penalty of Rs. 25,000/- could be sustained when that part of the order was not contested.

Issue (i): Whether the demand raised by the notice dated 5-4-2000 was barred by limitation and the penalty imposed in respect of that demand was sustainable.

Analysis: The disputed credit had already come to the knowledge of the department through audit and the jurisdictional Range Officer had recorded the recoverable amounts in a communication dated 16-7-98. In these circumstances, the later notice dated 5-4-2000 could not be supported by invocation of the extended period for pre-16-7-98 credit, since the material facts were already within departmental knowledge.

Conclusion: The demand of Rs. 1,61,079/- was barred by limitation and the corresponding penalty under Rule 57-I(4) of the Central Excise Rules, 1944 was set aside.

Issue (ii): Whether the demand of Rs. 1,39,259/- and the penalty of Rs. 25,000/- could be sustained when that part of the order was not contested.

Analysis: The challenge to that portion of the order was withdrawn, and no substantive dispute survived regarding the affirmed demand and penalty.

Conclusion: The demand of Rs. 1,39,259/- and the penalty of Rs. 25,000/- were sustained.

Final Conclusion: Relief was granted on the time-barred demand, while the remaining demand and penalty were maintained, resulting in partial success for the assessee.

Ratio Decidendi: Where the department is already aware of the relevant facts, a later notice cannot validly invoke the extended period of limitation on the basis of suppression for the same matter.

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