Prior disclosure defeats extended limitation in CENVAT credit dispute; suppression with intent to evade could not be sustained.

Where the department had prior knowledge of the manner in which CENVAT credit was being availed, the extended limitation period could not be invoked. Disclosure of the method of availment before the show-cause notice, and earlier explanation of the procedure, negatived any allegation of suppression with intent to evade duty. Mere omission or non-declaration was held insufficient; a positive act showing deliberate suppression was required. As the notice was issued nearly four years after the relevant disclosure, the demand was held time-barred and the order was set aside for the assessee. The merits of the credit dispute were not examined.

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Issues: Whether the demand of CENVAT credit was barred by limitation on the ground that the department had prior knowledge of the method of availment and, therefore, the extended period and allegations of suppression with intent to evade duty could not be invoked.

Analysis: The appellant had disclosed the manner of availing credit to the department before issuance of the show-cause notice, and the record reflected that the procedure for availment had been explained earlier as well. Once the department was aware of the manner in which credit was being taken, the allegation of suppression with intent to evade duty could not be sustained. Mere omission or non-declaration was held insufficient to establish wilful suppression; a positive act showing deliberate suppression or intent to evade was necessary. Since the notice was issued nearly four years after disclosure of the relevant facts, the demand was held to be time-barred. In view of this finding, the merits of the credit dispute were not examined.

Conclusion: The demand was held to be barred by limitation and the impugned order was set aside in favour of the assessee.

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