Cenvat credit demand fails where remand directions are ignored, notice scope is exceeded, and suppression is not proved.

Cenvat credit disallowance could not be sustained where the adjudicating authority failed to comply with remand directions, ignored the invoice and credit-register material, and travelled beyond the original show cause notice by introducing a new allegation on capital goods credit. On limitation, the extended period was unavailable because the demand rested on the appellant's own records and the department showed no positive suppression, misdeclaration, or deliberate withholding with intent to evade. In the absence of such intent, penalty also could not survive. The impugned order was set aside on both the credit dispute and the limitation issue.

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Issues: (i) Whether the disallowance of Cenvat credit could be sustained when the adjudicating authority did not properly comply with the remand directions and travelled beyond the scope of the show cause notice; (ii) whether the extended period of limitation and penalty were invokable on the facts of the case.

Issue (i): Whether the disallowance of Cenvat credit could be sustained when the adjudicating authority did not properly comply with the remand directions and travelled beyond the scope of the show cause notice.

Analysis: The dispute after remand was confined to the alleged excess availment of Cenvat credit arising from the difference between the closing balance for September 2009 and the opening balance for October 2009. The appellant had placed the relevant invoices and credit register entries on record to explain the figures, but the impugned order did not deal with those documents in a reasoned manner. On the material examined, the opening balance for October 2009 matched the credit register and the closing balance shown for September 2009 was found to be erroneous. The adjudicating authority also proceeded on a new allegation regarding 100% credit on capital goods, which was not part of the original show cause notice.

Conclusion: The disallowance could not be sustained. The order was beyond the scope of the show cause notice and did not properly comply with the remand directions.

Issue (ii): Whether the extended period of limitation and penalty were invokable on the facts of the case.

Analysis: The demand was founded on the appellant's own records and the department did not establish any positive act of suppression, misdeclaration, or deliberate withholding of information. The record did not show mala fide intent, and the discrepancy was treated as an inadvertent accounting error. In the absence of evidence of suppression with intent to evade, the conditions for invoking the extended period were not satisfied, and penalty could not survive.

Conclusion: The extended period of limitation was not invokable and the penalty was unsustainable.

Final Conclusion: The impugned order was set aside and the appellant succeeded on both the merits of the credit dispute and the limitation objection.

Ratio Decidendi: A demand cannot be sustained where the adjudicating authority exceeds the scope of the show cause notice or fails to give effect to remand directions, and the extended period of limitation requires proof of positive suppression or deliberate withholding of information with intent to evade.

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