Extended limitation and Modvat credit reversal: time-barred demand rejected, while exemption issue was remanded for verification.

Extended limitation could not be invoked where the assessee had filed the classification list and the Modvat and RT-12 records showing credit reversal were available to the department, so the demand for April 1992 to February 1994 was held time-barred. For the January 1995 to March 1995 period, exemption depended on whether Modvat credit was reversed on a daily basis in proportion to clearance. As the Chartered Accountant's certificate required factual verification and the record did not conclusively establish the debit entries, the matter was remanded for limited examination, with exemption to follow if the reversal was proved correct.

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Issues: (i) Whether the demand for the period April 1992 to February 1994 was barred by limitation on the ground that the extended period could not be invoked. (ii) Whether the assessee's reversal of Modvat credit on a day-to-day basis satisfied the exemption condition for the period January 1995 to March 1995.

Issue (i): Whether the demand for the period April 1992 to February 1994 was barred by limitation on the ground that the extended period could not be invoked.

Analysis: The assessee had filed the classification list and the relevant Modvat and RT-12 records were available to the department. The reversal of credit, including the practice followed after September 1992, was reflected in the records produced to the department. In these circumstances, the department could not sustain a charge of suppression so as to justify invocation of the extended period.

Conclusion: The demand for the period April 1992 to February 1994 was barred by limitation and failed.

Issue (ii): Whether the assessee's reversal of Modvat credit on a day-to-day basis satisfied the exemption condition for the period January 1995 to March 1995.

Analysis: The assessee produced a Chartered Accountant's certificate showing daily reversal of credit in proportion to clearance. The department's objection was that the reversal ought to have been made before clearance and through separate invoice-wise entries. The record before the appellate authority did not conclusively verify the correctness of the certificate, and the factual position required verification. In the interest of natural justice, the matter was sent back for limited factual examination.

Conclusion: The issue was remanded for verification of the debit entries, and exemption would follow if the daily reversal was found to be correct.

Final Conclusion: The appeal succeeded in part on limitation, while the remaining dispute on exemption entitlement was sent back for limited factual verification.

Ratio Decidendi: Where the relevant records disclose the assessee's credit reversal and the department had access to the classification and Modvat documents, extended limitation cannot be invoked for suppression; and where exemption depends on factual verification of daily credit reversal, remand is appropriate for limited verification rather than a final finding on entitlement.

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