Limitation and penalty fail where Cenvat credit reversal on wheeled-out electricity is contentious and no suppression is shown.

Where reversal of Cenvat credit on electricity wheeled out of the factory was legally contentious, and no suppression, fraud, or mala fides was established, the extended period of limitation could not be invoked and penalty was unsustainable. Any demand was therefore confined to the normal limitation period. The substantive liability on credit reversal under Rule 6(3) of the Cenvat Credit Rules, 2001/2002 was not finally decided and remained unexamined.

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Issues: Whether the extended period of limitation could be invoked and penalty imposed where the legality of reversal of Cenvat credit on electricity wheeled out of the factory was contentious.

Analysis: The electricity generated in the factory was not used entirely within the factory, and a portion was wheeled out. The issue under Rule 6(3) of the Cenvat Credit Rules, 2001/2002 was found to be contentious at the relevant time, and there was no clear basis to attribute mala fides to the appellant. In the absence of suppression, fraud, or other culpable conduct, the larger limitation period was not warranted. The question of substantive liability on wheeled-out electricity was not finally adjudicated in the impugned order and no opinion was expressed on that aspect.

Conclusion: The extended period of limitation was not invocable and any demand was confined to the normal period. Penalty was not sustainable.

Final Conclusion: The appellant obtained relief on limitation and penalty, while the underlying merits of credit reversal on wheeled-out electricity remained unexamined.

Ratio Decidendi: Where the governing Cenvat issue is legally contentious and no mala fides or suppression is established, the extended period of limitation and penalty cannot be sustained.

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