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Issues: (i) Whether the assessee was entitled to deemed Modvat credit on inputs found to be non-duty paid; (ii) Whether the extended period of limitation under the excise law could be invoked on the facts of the case.
Issue (i): Whether the assessee was entitled to deemed Modvat credit on inputs found to be non-duty paid.
Analysis: The inputs were treated as exempted or non-duty paid goods, and deemed Modvat credit was available only where the inputs were clearly recognisable as duty paid. On the facts found, the assessee had procured goods on which no duty had been paid, so the credit claimed was not admissible.
Conclusion: The issue was decided against the assessee and in favour of Revenue.
Issue (ii): Whether the extended period of limitation under the excise law could be invoked on the facts of the case.
Analysis: The assessee had claimed credit on the basis of declarations and invoices while suppressing the material fact that the inputs were non-duty paid. Such suppression and misstatement brought the case within the proviso to the limitation provision permitting extended recovery where duty has not been levied or paid because of suppression of facts with intent to evade duty.
Conclusion: The extended period of limitation was held invocable against the assessee and in favour of Revenue.
Final Conclusion: The reference was answered against the assessee, the denial of Modvat credit was upheld, and invocation of the extended limitation period was sustained.
Ratio Decidendi: Deemed Modvat credit cannot be claimed on inputs that are found to be non-duty paid, and where such credit is obtained by suppressing material facts, the extended period of limitation is attracted.
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