Wrongly entered CENVAT credit not actually utilised cannot support extended limitation or consequential penalty.

Where CENVAT credit is entered by mistake but is not actually availed or utilised, wilful suppression or intent to evade duty cannot be established. On that basis, invocation of the extended limitation period is unjustified, and a penalty linked to the disputed demand cannot survive. The text emphasises that the assessee's explanation in reply to the show cause notice was not properly addressed by the lower authorities, and the unsustainable demand and consequential penalty were set aside.

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Issues: Whether the demand of wrongly availed CENVAT credit, raised by invoking the extended period, and the consequential penalty could be sustained when the assessee asserted that the credit was taken by mistake but was not actually availed or utilized.

Analysis: The assessee had specifically stated in its reply to the show cause notice that the credit was taken belatedly by mistake, but was not availed by the mill. That plea was not properly dealt with by the lower authorities. On the admitted facts, once the credit was not actually taken or utilized, the allegation of wilful or deliberate intention to evade duty could not be sustained. In these circumstances, invocation of the extended period was not justified, and the penalty, being dependent on the unsustainable demand, could not survive.

Conclusion: The demand was held unsustainable and the penalty was also set aside. The appeal was allowed with consequential benefits as per law.

Final Conclusion: The assessee succeeded on the core dispute, and the confirmed demand along with the associated penalty was annulled.

Ratio Decidendi: Where CENVAT credit is taken by mistake but is not actually availed or utilized, an allegation of wilful suppression or intent to evade duty cannot be sustained, and the extended period and consequential penalty cannot stand.

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