Limitation for Modvat credit reversal failed where records were already disclosed and no suppression was shown.

Modvat credit reversal demand was held time-barred because the Department could not invoke the extended limitation period. The credit was taken on gate passes that already showed the manufacturer had availed set-off under Notification No. 432/86, and the relevant gate passes and RG-23A extracts had been furnished to the Department in the ordinary course. As the alleged lapse was detectable from records already on file, the notice reflected a delayed departmental scrutiny rather than suppression or concealment by the assessee. The extended period of limitation was therefore unavailable.

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Issues: Whether the demand for reversal of Modvat credit was barred by limitation and whether the extended period could be invoked on the facts.

Analysis: The credit had been taken on gate passes that themselves bore a remark showing the manufacturer had availed the set-off under Notification No. 432/86 dated 6-10-1986. The appellant had also submitted the relevant gate passes and RG-23A extracts to the Department in the ordinary course. From these documents, the Department could have ascertained that the appellant had taken credit of the entire duty paid. The notice itself indicated that the lapse was noticed on verification and scrutiny of the documents already filed, and not on the basis of any concealed material. On that footing, the delay in issuing notice was attributable to the Department's failure to examine the records in time, not to suppression by the appellant.

Conclusion: The extended period of limitation was not available to the Department, and the demand was time-barred.

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