Clandestine manufacture and suppression upheld, but Modvat credit allowed where inputs were used in dutiable production.

Seized documents, admissions and transport vouchers were treated as sufficient evidence of clandestine receipt of LAB in fictitious names, manufacture of acid slurry and unaccounted clearance, so the factual finding was not held perverse. On those established facts of suppression and clandestine activity, the extended period of limitation was validly invoked. However, Modvat credit could not be denied merely because the transactions were suppressed, where the inputs were found to have been actually used in manufacturing dutiable final products and no specific rule barred the credit. The appeal was therefore only partly allowed.

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Issues: (i) whether the Tribunal's finding that the appellant had procured LAB in third parties' names and used it in manufacture of acid slurry was perverse or unsupported by material; (ii) whether the extended period of limitation could be invoked; and (iii) whether Modvat credit could be denied merely because the appellant was found to have suppressed manufacture and clearance of dutiable goods.

Issue (i): whether the Tribunal's finding that the appellant had procured LAB in third parties' names and used it in manufacture of acid slurry was perverse or unsupported by material.

Analysis: The record contained seized documents, admissions recorded during investigation, transport vouchers and other materials showing receipt of raw material in fictitious names, manufacture of acid slurry and clearance without proper accounting. The Court held that these materials provided sufficient basis for the concurrent findings of fact and that no contrary material was produced to establish perversity or absence of evidence.

Conclusion: The finding was not perverse or unsupported by material and was upheld against the assessee.

Issue (ii): whether the extended period of limitation could be invoked.

Analysis: Since the authorities had found suppression of manufacture and removal of excisable goods, the invocation of the extended period followed from the established facts of clandestine activity and suppression of turnover. No legal error was shown in the use of the extended period on those facts.

Conclusion: The extended period of limitation was rightly invoked, against the assessee.

Issue (iii): whether Modvat credit could be denied merely because the appellant was found to have suppressed manufacture and clearance of dutiable goods.

Analysis: The Court held that the demand proceeded on the footing that the raw material had in fact been purchased and used in manufacture of dutiable finished goods. In the absence of any specific rule disentitling a manufacturer from Modvat credit merely because the transactions were suppressed, the credit attributable to inputs actually used in the manufacture of dutiable final products could not be denied.

Conclusion: Modvat credit was admissible, and the denial of credit was set aside in favour of the assessee.

Final Conclusion: The concurrent findings on clandestine procurement, manufacture and suppression were sustained, the limitation objection failed, but the assessee was held entitled to Modvat credit on inputs used in manufacture of the dutiable product, resulting in a partial allowance of the appeal.

Ratio Decidendi: Concurrent factual findings based on seized documents and admissions will not be disturbed in appeal unless shown to be perverse or unsupported by evidence, and Modvat credit cannot be denied merely on the ground of suppression where the inputs are found to have been used in manufacture of dutiable final products and no specific rule bars the credit.

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