Extended limitation and Cenvat credit on inter-unit stock transfers depend on suppression findings and the scope of Rule 7 restrictions.

In a self-assessment regime, continued adoption of an outdated assessable value despite higher production costs and realised prices, without disclosure of revised cost data, was treated as suppression of facts with wilful misstatement, so the extended limitation period under the Central Excise Act was validly invoked. Rule 7(1)(b) of the Cenvat Credit Rules did not bar credit on supplementary invoices where duty had been paid on an inter-unit stock transfer; the restriction was held inapplicable because the transaction was not a sale and the substantive entitlement to credit under Rule 3 remained available.

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Issues: (i) Whether the extended period of limitation under section 11A(1) of the Central Excise Act, 1944 was rightly invoked on the facts found. (ii) Whether Rule 7(1)(b) of the Cenvat Credit Rules, 2002 barred availment of Cenvat credit on supplementary invoices issued for stock transfer between the assessee's units.

Issue (i): Whether the extended period of limitation under section 11A(1) of the Central Excise Act, 1944 was rightly invoked on the facts found.

Analysis: The assessable value adopted for clearances to the Bangalore unit remained fixed despite escalation in the cost of production and higher realizations from independent buyers. The assessee, being under a self-removal and self-assessment regime, did not disclose the revised cost data to the department and only paid the differential duty after detection. On the facts, the nondisclosure was treated as suppression of facts coupled with wilful misstatement, bringing the case within the proviso to section 11A(1).

Conclusion: The extended period of limitation was validly invoked, and this issue was decided in favour of Revenue.

Issue (ii): Whether Rule 7(1)(b) of the Cenvat Credit Rules, 2002 barred availment of Cenvat credit on supplementary invoices issued for stock transfer between the assessee's units.

Analysis: The credit in question arose from duty paid by one unit of the same manufacturer on goods transferred to another unit, not from a sale transaction. The Court treated Rule 7 as enabling documents for credit and held that the restriction in Rule 7(1)(b) operates in the context of sale and cannot override the substantive entitlement to credit under Rule 3 where duty has in fact been paid. Since the transfer was an inter-unit stock transfer and the duty paid at Mysore was available as credit at Bangalore, the prohibition was held inapplicable.

Conclusion: Rule 7(1)(b) did not bar the credit, and this issue was decided in favour of the assessee.

Final Conclusion: The Court upheld the invocation of the extended limitation period but rejected the revenue's challenge to Cenvat credit on supplementary invoices arising from inter-unit stock transfer; accordingly, both appeals were dismissed.

Ratio Decidendi: In a self-assessment regime, nondisclosure of a revised assessable value and continued adoption of an outdated cost basis despite escalation in production cost amounts to suppression of facts for section 11A; but the restriction on supplementary-invoice credit under Rule 7(1)(b) does not defeat Cenvat credit where duty has been paid on inter-unit stock transfer and the transaction is not a sale.

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