Limitation barred Modvat credit demand where no fraud was shown and the extended period could not be invoked.

Irregular Modvat credit was held time-barred because the longer limitation period could not be invoked without fraud or a fraudulent motive. The Tribunal noted that the earlier final order had omitted the limitation issue, and that the same absence of fraud had already supported setting aside the penalty. Since the credit was taken on 12-8-1992 and the show cause notice was issued on 11-1-1994, the demand fell outside the permissible period and was set aside in rectification proceedings. The rectification application was allowed to that extent.

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Issues: Whether the demand of irregular Modvat credit was barred by limitation and liable to be set aside in rectification proceedings.

Analysis: The Tribunal noted that in the earlier final order, the question of limitation had been omitted from consideration. It was recorded that no fraudulent motive could be attributed to the assessee in taking the irregular Modvat credit, and the same reasoning had already led to setting aside the penalty. As the credit was taken on 12-8-1992 and the show cause notice was issued only on 11-1-1994, the longer period of limitation could not be invoked in the absence of fraud.

Conclusion: The demand of Modvat credit of Rs. 30,054/- was held to be time-barred and was set aside. The rectification application was allowed to that extent.

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