Cenvat credit demand fails when based on untested third-party evidence and extended limitation is unsupported by suppression findings.

Wrongful availment of Cenvat credit could not be sustained where the demand rested mainly on uncorroborated third-party statements and material, and the assessee was denied effective cross-examination despite producing contrary records such as register entries, ledgers, bank statements and transport papers. The limitation issue also failed for the revenue: the clearances were on payment of duty, and in the absence of suppression, wilful misstatement or mala fide intent, the extended period could not be invoked. The demand for the earlier period was therefore time-barred, and the demand, interest and equal penalty were set aside.

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Issues: (i) Whether denial of cross-examination and reliance on uncorroborated third-party evidence vitiated the finding of wrongful availment of Cenvat credit; (ii) whether the demand for the period 2012-13 was barred by limitation and the extended period could be invoked.

Issue (i): Whether denial of cross-examination and reliance on uncorroborated third-party evidence vitiated the finding of wrongful availment of Cenvat credit.

Analysis: The demand was founded substantially on material gathered from third-party premises and on statements recorded during investigation. The appellant had produced documents such as raw material register entries, ledger accounts, bank statements and transport-related papers to show receipt of inputs on FOR basis and payment against invoices. The record also showed that the authorities ignored the documentary material supporting the appellant's version. Where the adverse finding is based on third-party statements, denial of an opportunity to confront that material through cross-examination deprives the affected party of fair trial safeguards. The evidence recovered from third-party premises, without effective corroboration from the appellant's premises or contrary documentary proof, was insufficient to displace the appellant's defence.

Conclusion: The finding of wrongful availment of Cenvat credit on the basis of third-party material was not sustainable.

Issue (ii): Whether the demand for the period 2012-13 was barred by limitation and the extended period could be invoked.

Analysis: The appellant's final products were cleared on payment of duty and there was no demonstrated evasion or mala fide intent. In the absence of such ingredients, the conditions for invoking the extended limitation period were not made out. The show cause notice issued in November 2016 for a period pertaining to 2012-13 was therefore beyond time.

Conclusion: The demand was barred by limitation and the extended period could not be invoked.

Final Conclusion: The demand, interest and equal penalty were set aside, and the appeal was allowed as the impugned order could not be sustained in law.

Ratio Decidendi: A demand based mainly on uncorroborated third-party evidence cannot be sustained where the assessee is denied effective cross-examination and has produced contrary documentary evidence, and the extended period of limitation is not available in the absence of suppression, wilful misstatement or mala fide intent.

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