Modvat credit on imported inputs cannot be denied for piecemeal availment, and limitation fails without suppression.

Modvat credit of CVD on imported inputs could not be denied merely because it was taken in piecemeal as the goods were received in the factory, since the credit was otherwise admissible and the dispute related only to timing of availment; the denial was therefore unsustainable. The demand was also time-barred because the bills of entry were produced for defacing, which negatived suppression or misstatement and prevented invocation of the extended limitation period. The order was set aside and relief was granted to the assessee.

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Issues: (i) whether Modvat credit of CVD paid on imported inputs could be denied merely because the credit was taken in piecemeal as the goods were received in the factory; and (ii) whether the demand was barred by limitation in the absence of suppression or misstatement.

Issue (i): whether Modvat credit of CVD paid on imported inputs could be denied merely because the credit was taken in piecemeal as the goods were received in the factory.

Analysis: The credit was not disputed on merits and the only objection was to the timing of availment. The dispute was held to be revenue neutral, and the Board circular relied upon was found to relate to indigenously manufactured goods and not to imported goods covered by bills of entry. A mere objection as to when credit was taken could not justify denial of the credit itself.

Conclusion: The denial of Modvat credit on the ground that it was taken in piecemeal was unsustainable and was decided in favour of the assessee.

Issue (ii): whether the demand was barred by limitation in the absence of suppression or misstatement.

Analysis: The bills of entry were produced before the Superintendent for defacing, and this circumstance negatived any inference that the department was kept in the dark. Once the documents were subjected to verification and defacement, suppression or misstatement could not be presumed so as to invoke the longer limitation period.

Conclusion: The demand was barred by limitation and this issue was also decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where credit is otherwise admissible and the dispute concerns only the timing of availment, denial is not justified, and the extended period of limitation cannot be invoked absent proven suppression or misstatement.

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