Theoretical Cenvat credit demand fails where input consumption is not verified and extended limitation lacks suppression evidence.

Demand of excess Cenvat credit based on a theoretical input-consumption norm was unsustainable because the adjudicating authority lacked actual verification of consumption or any reliable basis to fix the quantity of inputs required for manufacture. A show-cause notice resting on presumption, rather than legally supportable computation, could not sustain the demand. The record also did not justify invocation of the extended limitation period on the ground of suppression. On these findings, the demand and penalty were held unsustainable and the matter was decided in favour of the assessee.

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Issues: Whether the demand of excess Cenvat credit based on theoretical computation and the invocation of extended limitation were sustainable.

Analysis: The demand was founded on a presumed excess consumption of inputs without actual verification of consumption or any reliable basis for fixing the quantity of inputs required for manufacture. The adjudicating authority could not determine the appropriate input norm on a purely theoretical foundation. The show-cause notice was therefore treated as resting on presumption and not on a legally sustainable basis. The record also did not support invocation of the extended period on the ground of suppression.

Conclusion: The demand and penalty were not sustainable, and the issue was decided in favour of the assessee.

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