Limitation bars extended period where the department knew the facts and delayed issuing the show cause notice.

The demand was held time-barred because the show cause notice was issued nearly three years after the department had already visited the factory, seized records and recorded statements. The extended period was not justified on these facts, as the assessee was expected to disclose the material relating to denial of SSI exemption where goods were cleared under another person's brand name. Earlier cited cases were distinguished because they involved different factual settings, including prior declarations and departmental knowledge of the material facts. Limitation therefore operated in favour of the assessee.

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Issues: Whether the demand was barred by limitation and the extended period could be invoked when the show cause notice was issued about three years after the department had gathered the relevant facts.

Analysis: The department had visited the factory, seized records, and recorded statements on 5-11-1999, yet the show cause notice was issued only on 25-7-2002. The exemption notification denied SSI benefit where goods were cleared under the brand name of another person, and the assessee was expected to disclose the relevant facts. The decision in the cited cases turned on different factual settings, particularly where declarations had been filed and the department was already aware of the material facts. On the present facts, the delay in issuing the notice after obtaining the information was treated as material for limitation purposes.

Conclusion: The demand was held to be time-barred and the assessee was granted the benefit of limitation.

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