Simultaneous MODVAT and proforma credit was barred before amendment, while limitation reduced the recoverable demand.

Rule 56A(9), as it stood before 15-4-1987, was treated as an unambiguous bar on a manufacturer taking proforma credit under Rule 56A while also availing MODVAT credit under Rule 57A, even for different inputs and final products; the later amendment was not applied retrospectively. On limitation, the record did not establish wilful misstatement or suppression for all notices, so one notice was partly time-barred, two notices were time-barred, and one notice remained within time. Recovery was therefore confined to the enforceable portion of the demand.

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Issues: (i) Whether, prior to the amendment of Rule 56A(9), a manufacturer availing MODVAT credit under Rule 57A could simultaneously avail proforma credit under Rule 56A in respect of different inputs and final products; (ii) whether the demands were barred by limitation.

Issue (i): Whether, prior to the amendment of Rule 56A(9), a manufacturer availing MODVAT credit under Rule 57A could simultaneously avail proforma credit under Rule 56A in respect of different inputs and final products.

Analysis: Rule 56A(9), as introduced on 1-3-1986, stated that nothing in Rule 56A shall apply to a manufacturer availing credit of duty paid on inputs under Rule 57A. The language was treated as plain and unambiguous. The subsequent amendment of 15-4-1987 was not accepted as clarificatory for the earlier period. The coexistence of the two credit schemes was held to be barred until the amendment came into force.

Conclusion: The simultaneous availment of MODVAT credit under Rule 57A and proforma credit under Rule 56A was not permissible prior to 15-4-1987, and this issue was decided against the assessee.

Issue (ii): Whether the demands were barred by limitation.

Analysis: The reply given to the Range Superintendent was held to be cryptic, but not sufficient on the record to establish wilful misstatement or suppression of facts for the earlier notices. The notice dated 26-11-1986 was held partly time-barred to the extent of credit taken before 26-5-1986. The notices dated 28-11-1986 and 13-8-1987 were held to be barred by time. The notice dated 5-3-1987 was held to be within time. Recovery was therefore required to be quantified only for the enforceable part of the demands.

Conclusion: The limitation objection succeeded in part, and the demands were sustained only to the extent found to be within time.

Final Conclusion: The appeal was rejected on the substantive issue of entitlement to simultaneous credit, but relief was granted on limitation, resulting in partial relief to the assessee and partial success to the Revenue.

Ratio Decidendi: Where the language of a fiscal credit rule creates a clear bar on a manufacturer availing one credit scheme, simultaneous recourse to another scheme is impermissible until the rule is amended, and recovery demands must also satisfy the applicable limitation period in the absence of established suppression or wilful misstatement.

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