Excise credit wrongly taken as set-off was recoverable as short levy, but the demand failed for limitation.

Erroneously availed excise credit used as a set-off against duty on finished goods was treated as recoverable as short levy under the statutory recovery machinery. The absence of any express time limit in the exemption notification did not displace the limitation under Section 11A, and the distinction between credit formally allowed and credit unilaterally taken was held immaterial for recovery. Because the notice was issued after the applicable limitation period, the demand was time-barred and the recovery could not be sustained, with relief following to the assessee.

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Issues: Whether a demand for recovery of credit of duty wrongly taken under the exemption notification was governed by the limitation under Section 11A, and whether the notice issued after more than two years was time-barred.

Analysis: The credit taken by the manufacturer was a set-off against duty on finished goods, and the recovery proceedings were directed against credit already availed of as duty paid on inputs. The decision treated such erroneous credit as amounting, in substance, to short levy for the purposes of recovery. The absence of any specific time limit in the notification did not exclude the statutory recovery machinery, and the reasoning of the cited High Court decisions on analogous Rule 56A situations was followed. The distinction drawn by the revenue between credit "allowed" and credit unilaterally taken was held to be immaterial for this purpose.

Conclusion: Section 11A applied, the demand was hit by limitation, and the notice was set aside in favour of the assessee.

Final Conclusion: The recovery of the disputed credit was not sustainable, and the appeal succeeded with consequential relief.

Ratio Decidendi: Erroneously availed credit of duty used as a set-off against duty on finished goods is recoverable as short levy under the excise recovery provisions, and where the statutory notice is issued beyond the applicable limitation period, the demand is barred by time.

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