Conditional exemption notification and deemed Modvat credit: Revenue may deny credit by proving the notified conditions were satisfied.

Deemed Modvat credit was denied where inputs were cleared under a conditional exemption notification and fell within the relevant serial of the notification. The notification operated subject to a certified condition, and the Larger Bench principle placed on the Revenue the burden to show that the notified conditions were satisfied. That burden was treated as discharged on the facts, so the inputs were treated as not eligible for deemed credit. The finding of suppression was also sustained, and the extended period of limitation was upheld.

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Issues: Whether deemed Modvat credit was admissible on inputs cleared under the exemption notification, and whether the extended period of limitation was correctly invoked.

Analysis: The inputs were cleared under Notification No. 180/88-C.E. and the goods fell within the relevant serial of the notification. The notification operated subject to a condition certified to have been observed by the manufacturer of the inputs. On the basis of the Larger Bench ruling, a conditional exemption shifts the burden to the Revenue to show that the conditions were satisfied. That burden was treated as discharged on the facts of the case. The finding on suppression and the use of the extended period was also upheld.

Conclusion: Deemed Modvat credit was not available to the appellants, and the invocation of the extended period was upheld.

Ratio Decidendi: Where inputs are cleared under a conditional exemption notification, the Revenue can deny deemed credit by establishing satisfaction of the notified conditions and the goods' non-duty-paid character.

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