Extended limitation cannot be invoked where facts are disclosed in records and notice rests only on audit objection

Disclosure of the receipt of rejected goods in statutory records and monthly returns placed the material facts within departmental knowledge, so the extended period of limitation could not be invoked. A show cause notice issued later only on the basis of an audit objection, without further investigation, was insufficient to sustain the time-bar exception. The resulting demand was treated as time-barred, with the appeal succeeding on limitation without the merits of the Cenvat credit dispute being examined.

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Issues: Whether the demand was barred by limitation and, consequently, whether the appeal was liable to be allowed without examining the merits of the Cenvat credit dispute.

Analysis: The appellant had disclosed the receipt of rejected goods in the statutory records and filed monthly returns, so the relevant facts were already within the department's knowledge. The show cause notice was issued only on the basis of an audit objection, after a considerable delay and without any further investigation. In such circumstances, the ingredients necessary for invoking the extended period were not established.

Conclusion: The demand was held to be time-barred and the appeal was allowed on limitation.

Ratio Decidendi: When the material facts are disclosed in the statutory records and are within the knowledge of the department, the extended period of limitation cannot be invoked merely on the basis of an audit objection without further investigation.

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