Limitation and suppression fail where department already knew of disputed credit entries through prior audit records.

Duty credit was denied on merits because the invoices described the goods as bars, patta or copper rather than scrap, but the extended limitation failed because the department already knew of the disputed invoice numbers and the wrong credit entries from an earlier audit objection. In these circumstances, the later show cause notice could not sustain an allegation of suppression of facts, so the demand and penalty were barred by limitation.

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Issues: Whether the demand and penalty could be sustained when the show cause notice was issued nearly three years after the department had knowledge of the alleged wrong availment of credit, so that the allegation of suppression and the invocation of limitation could not survive.

Analysis: The credit dispute on merits was found against the assessee because the invoices mostly described the goods as bars, patta, or copper, and not as scrap. However, the record showed that the disputed invoices were already within the department's knowledge through the audit objection of August 1989, which specifically referred to the same invoice numbers and the wrong credit entries in RG 23A and RT 12 returns. In such circumstances, the later notice issued in November 1992 could not validly allege suppression of facts. The extended demand therefore failed on limitation.

Conclusion: The demand was barred by limitation and the invocation of suppression was unsustainable; the appeal succeeded in favour of the assessee.

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