Modvat credit reversal before an amnesty scheme cannot be used to compel interest or further liability without timely demand.

Reversal of Modvat credit made long before an export amnesty scheme under Notification No. 203/92-Cus. could not be treated as a basis to compel interest or further liability, especially where the last reversal had occurred well before the scheme and no timely objection or demand was raised. The tribunal noted that any additional amount, if otherwise payable, had to be demanded within the normal limitation period. An amnesty scheme was meant for voluntary compliance by eligible offenders and could not be enforced against an assessee who had already reversed the credit before the scheme came into existence. The demand for interest was therefore unsustainable.

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Issues: Whether the appellant was liable to pay interest or forfeit refund in relation to reversed Modvat credit where the reversal had been made long before the amnesty scheme for exports under Notification No. 203/92-Cus. was introduced.

Analysis: The appellant had reversed the Modvat credit in respect of the export consignments much before the 1997 amnesty scheme, and the last reversal was about one and a half years earlier. No objection was raised by the authorities at that time. If any further amount was considered payable, the demand ought to have been raised within the normal time limit. The amnesty scheme was intended to be availed of by offenders voluntarily and was not meant to be enforced by the revenue authorities against a party that had already reversed the credit before the scheme came into existence.

Conclusion: The demand for interest was not sustainable and the appellant was entitled to relief.

Final Conclusion: The appeal succeeded and the impugned order was set aside.

Ratio Decidendi: An amnesty scheme cannot be compulsorily enforced by the revenue where the assessee had already reversed the credit long before the scheme and no timely demand was raised for any further liability.

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