Extended limitation and Modvat credit principles: prior departmental knowledge cuts off continuing suppression, and settled credit cannot be reopened.

The text explains that the extended limitation period for central excise demand could apply only for the earlier period, because once the department had knowledge of the manufacturing activity and exemption claim, suppression could not be treated as continuing. It also states that Modvat credit of duty actually paid could not be denied by the adjudicating authority where the credit had already been allowed in an earlier remand order and no appeal had been filed against that determination. Duty was further to be recomputed on a cum-duty price basis, with any consequential penalty to be reconsidered after hearing the assessee.

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Issues: (i) Whether the extended period of limitation was invokable for demanding central excise duty; (ii) whether Modvat credit of duty actually paid and re-computation of duty on cum-duty price basis were to be allowed.

Issue (i): Whether the extended period of limitation was invokable for demanding central excise duty.

Analysis: The exemption notification covered tubes and pipes manufactured out of flats of thickness not exceeding the prescribed limit. The inputs were described as bars in the documents, but the assessee had requested certification from the department regarding exemption and the department thereby acquired knowledge of the manufacturing activity and exemption claim. Once such knowledge was available, the department could have investigated further, and suppression could not be said to continue thereafter. However, the prior non-disclosure supported invocation of the extended period only for the earlier period.

Conclusion: The extended period was applicable only up to 22-1-1991 and was not invokable thereafter.

Issue (ii): Whether Modvat credit of duty actually paid and re-computation of duty on cum-duty price basis were to be allowed.

Analysis: The Tribunal had already allowed Modvat credit in the earlier remand order, and no appeal had been filed against that determination. The adjudicating authority could not disallow the credit on fresh grounds. The duty also had to be recomputed treating the price as cum-duty price.

Conclusion: Modvat credit was required to be allowed and duty was to be recomputed on cum-duty price basis.

Final Conclusion: The matter required fresh adjudication limited to duty recomputation, allowance of Modvat credit, and any consequential penalty after hearing the assessee.

Ratio Decidendi: Once the department has acquired knowledge of the relevant facts, suppression cannot be said to continue for the purpose of the extended limitation period, and a completed allowance of Modvat credit cannot be reopened by the adjudicating authority in the absence of an appeal against that prior determination.

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