Extended limitation barred where clearance was disclosed in returns, causing duty demand, interest, and penalty to fail.

Duty recovery on removal of capital goods as such was held barred by limitation because the assessee had disclosed the clearance and duty payment in its monthly return, so invocation of the extended period under Section 11A of the Central Excise Act, 1944 was not justified. Although Rule 3(4) of the Cenvat Credit Rules, 2002 allowed utilization of credit only to the extent actually taken and the payment on clearance was treated as irregular credit use recoverable under Rule 12, the disclosed facts prevented extended limitation. The demand therefore failed, and the consequential interest under Section 11AB and penalty under Section 11AC also could not survive.

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Issues: Whether the demand raised on reversal of Cenvat credit for removal of capital goods as such was barred by limitation and whether the related interest and penalty could survive.

Analysis: Rule 3(4) of the Cenvat Credit Rules, 2002 permitted utilization of credit for removal of capital goods as such only to the extent of the credit actually taken. The facts showed that no Cenvat credit had been availed when the capital goods were received, and the reversal/payment made on clearance was treated as irregular use of credit recoverable under Rule 12 of the Cenvat Credit Rules, 2002. However, the assessee had disclosed the clearance and duty payment in the monthly return for April 2003, and that disclosure was not disputed. In such circumstances, invocation of the extended period under Section 11A of the Central Excise Act, 1944 was not justified.

Conclusion: The demand was barred by limitation and could not be sustained. The consequential interest under Section 11AB of the Central Excise Act, 1944 and penalty under Section 11AC of the Central Excise Act, 1944 also failed.

Ratio Decidendi: Where the relevant facts are disclosed in statutory returns, the extended period of limitation cannot be invoked for recovery of duty, and consequential interest and penalty also fall with the demand.

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