Extended limitation and Cenvat penalty fail where endorsed invoices are received by a job worker without proof of suppression or fraud.

Extended limitation could not be invoked against a job worker who received goods through endorsed invoices from principal manufacturers, where the notice contained no specific allegation or evidence of suppression, misdeclaration, fraud, or collusion by the recipient. The Cenvat credit demand therefore failed on limitation and was set aside. Penalty under Rule 15(2) read with Section 11AC also could not be sustained in rebate-related proceedings because the allegation of bogus or fake suppliers was unsupported by evidence and no culpable conduct by the assessee was established. The penalty was likewise set aside.

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Issues: (i) whether the demand of Cenvat credit could be sustained by invoking the extended period of limitation when the appellant was a job worker and there was no specific allegation or evidence of suppression, misdeclaration, fraud, or collusion on its part; (ii) whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was sustainable in the rebate-related proceedings in the absence of evidence supporting the allegation of bogus or fake suppliers.

Issue (i): whether the demand of Cenvat credit could be sustained by invoking the extended period of limitation when the appellant was a job worker and there was no specific allegation or evidence of suppression, misdeclaration, fraud, or collusion on its part

Analysis: The demand was founded on invoices of parties mentioned in an alert circular, but the show cause notice did not contain a specific allegation of suppression or deliberate wrongdoing by the appellant. The appellant received goods from principal manufacturers for job work by endorsement of invoices and did not directly deal with the allegedly fake suppliers. In such a situation, the principle applied was that the larger period cannot be used against a recipient who is not shown to be a party to the fraud or evasion. The reasoning followed the line of authority that mere receipt of endorsed documents, without proof of positive suppression or fraud by the recipient, does not justify extended limitation.

Conclusion: The demand of Cenvat credit was not sustainable on limitation and was set aside in favour of the assessee.

Issue (ii): whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was sustainable in the rebate-related proceedings in the absence of evidence supporting the allegation of bogus or fake suppliers

Analysis: The rebate-related notice merely alleged wrong availment of credit on the basis of fake or non-existent suppliers, but the allegation was not supported by evidence. The extended period was not invoked in that proceeding, and the penalty provisions could not be applied mechanically in the absence of a substantiated finding of culpable conduct. Since the notice itself lacked evidentiary support for the foundational allegation, the penalty could not survive.

Conclusion: The penalty was unsustainable and was set aside in favour of the assessee.

Final Conclusion: Both the credit demand and the penalty failed, resulting in complete relief to the appellants.

Ratio Decidendi: Extended limitation and penal consequences cannot be sustained against a recipient of endorsed invoices unless the recipient is specifically shown, by allegation and evidence, to have participated in suppression, fraud, or evasion.

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