Modvat credit on capital goods sent to a job worker was denied, and penalty survived despite no express limitation period.

Modvat credit was not admissible on iron moulds treated as capital goods, because Rule 57F(3) of the Central Excise Rules, 1944 applied only to inputs and not to such goods sent to a job worker. The credit was therefore wrongly availed and its reversal was justified. Penalty under Rule 173Q(1)(bb) was also sustainable once the wrongful availment was established, and the absence of an express limitation period in the rule meant the notice was not time-barred.

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Issues: Whether Modvat credit was admissible on iron moulds treated as capital goods and sent to a job worker under Rule 57F(3) of the Central Excise Rules, 1944, and whether penalty imposed for wrong availment was sustainable in the absence of a prescribed time limit.

Analysis: The iron moulds were held to be capital goods and not input material. Rule 57F(3) of the Central Excise Rules, 1944 applied only to inputs, so the goods could not validly be sent to the job worker under that provision. The credit taken on such goods was therefore wrongly availed and its reversal was justified. Once the credit was wrongly availed, penalty was attracted under Rule 173Q(1)(bb) of the Central Excise Rules, 1944. The rule did not prescribe any limitation period for issuance of notice, so the plea of time bar was rejected.

Conclusion: The Modvat credit was not admissible on the iron moulds, and the penalty imposed for wrong availment was upheld against the assessee.

Ratio Decidendi: Where Modvat credit is wrongly taken on capital goods that do not fall within the scope of the relevant input-removal provision, penalty may be imposed under the penal rule and the absence of an express limitation period bars no notice on time limitation grounds.

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