Irregular Modvat credit transfer without authorisation attracts recovery without limitation defence, sustaining disallowance and penalty.

Modvat credit transferred to a new factory without the requisite legal authorisation was treated as irregular availment rather than a clerical or mistaken credit entry, so recovery was not barred by limitation. The Tribunal noted that the credit had been taken in the old factory before the transfer request, and the inconsistent factual explanation did not support a time-bar defence. On that basis, the demand was sustained under the provision governing irregular credit, and the challenge to disallowance of credit and penalty failed.

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Issues: Whether Modvat credit transferred to a new factory without requisite permission was irregular and recoverable under Rule 57-I of the Central Excise Rules, 1944, and whether the demand was barred by limitation.

Analysis: The credit had been taken in the old factory and the request for transfer was made only later, after the factory had shifted. The claimed grounds that permission was not granted and that the credit had already been taken were inconsistent. The Tribunal held that the facts did not support an inference that the demand was time-barred, and that the case did not fall under sub-rule (1) of Rule 57-I. Instead, the situation was one where credit had been availed in a manner not authorised by law, attracting sub-rule (2), under which recovery was not barred by limitation.

Conclusion: The challenge to the disallowance of Modvat credit and penalty failed, and the Revenue's position was upheld.

Final Conclusion: The order below was sustained, and the appeal was rejected on merits.

Ratio Decidendi: Where credit is availed and sought to be transferred without legal authorisation, recovery proceeds under the provision governing irregular availment rather than the provision confined to clerical or mistaken credit, and the corresponding limitation defence does not apply.

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