Limitation and clandestine removal claims fail without fresh material or corroborative evidence of actual diversion and credit misuse.

Extended limitation could not be sustained where the department relied on the same facts already covered in an earlier notice and showed no new material amounting to suppression, so the demand was barred by limitation. Allegations of shortages, clandestine production and clearance, and diversion of inputs failed because private records and production slips were not corroborated by tangible evidence such as excess procurement, abnormal power use, transport records, buyer evidence, or sale proceeds. Denial of Cenvat credit also failed where statutory records reflected receipt and use of inputs, and no proof showed credit had actually been taken on quantities later cleared as such.

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Issues: (i) Whether the demand raised by invoking the extended period of limitation was sustainable when the same set of facts had already been within the department's knowledge in an earlier notice; (ii) Whether the demand of duty based on alleged shortage of inputs and finished goods and alleged clandestine production and clearance on the strength of private records and production slips was sustainable; (iii) Whether denial of Cenvat credit on the allegation of non-receipt or diversion of inputs was sustainable; (iv) Whether Cenvat credit could be denied on the allegation that inputs were cleared as such without reversal of credit despite the assessee's claim that no credit had been taken on such quantities.

Issue (i): Whether the demand raised by invoking the extended period of limitation was sustainable when the same set of facts had already been within the department's knowledge in an earlier notice.

Analysis: The demand was founded on the same investigation and factual material as the earlier notice. No new material was shown to have emerged thereafter. On that basis, the precondition for invoking the extended period was absent, since the department could not treat previously known facts as suppression in a subsequent notice.

Conclusion: The invocation of the extended period of limitation was unsustainable and the demand was barred by limitation.

Issue (ii): Whether the demand of duty based on alleged shortage of inputs and finished goods and alleged clandestine production and clearance on the strength of private records and production slips was sustainable.

Analysis: The shortages were explained as arising from stock-taking discrepancies, movement of goods in transit, and gauge-wise processing in the manufacture of wire products. For clandestine removal, the material on record did not show corroboration such as excess raw material procurement, abnormal electricity consumption, transport documents, buyer evidence, receipt of sale proceeds, or other tangible indicia of removal. The private records and production slips, by themselves, were insufficient to establish clandestine clearances.

Conclusion: The duty demand on the basis of alleged shortages and alleged clandestine clearances was not sustainable.

Issue (iii): Whether denial of Cenvat credit on the allegation of non-receipt or diversion of inputs was sustainable.

Analysis: The allegation rested mainly on entries missing from a private register, while the statutory records reflected receipt and use of the inputs. No positive evidence was brought to show actual diversion of the inputs or to displace the statutory records by reliable proof of non-receipt.

Conclusion: The denial of Cenvat credit on the allegation of non-receipt or diversion of inputs was not sustainable.

Issue (iv): Whether Cenvat credit could be denied on the allegation that inputs were cleared as such without reversal of credit despite the assessee's claim that no credit had been taken on such quantities.

Analysis: The assessee's case was that the quantities were traded and no credit had been availed on those clearances. The department did not establish by evidence that credit had actually been taken on the quantities in question. In the absence of proof of availment of credit, reversal could not be demanded.

Conclusion: The credit demand on clearances as such without reversal of credit was not sustainable.

Final Conclusion: The entire demand and consequential penalties were set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: Clandestine removal and related credit demands must be proved by tangible corroborative evidence, and the extended period cannot be invoked on facts already known to the department from an earlier notice.

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