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Issues: (i) whether recredit of excess CENVAT credit reversed by mistake could be taken suo motu; (ii) whether the demand could be sustained by invoking the extended period of limitation.
Issue (i): whether recredit of excess CENVAT credit reversed by mistake could be taken suo motu.
Analysis: The dispute arose from excess reversal of CENVAT credit caused by arithmetical and clerical mistakes. The reversal was made only to neutralise an incorrect debit, and the credit was re-availed on discovery of the error. The reasoning accepted that where the amount was wrongly reversed and no fresh duty liability arose, there was no legal bar to rectifying the mistake by recredit. The issue was treated as settled in favour of the assessee on the facts of the case.
Conclusion: The suo motu recredit was permissible and the finding against the assessee on merits could not be sustained.
Issue (ii): whether the demand could be sustained by invoking the extended period of limitation.
Analysis: The record did not disclose fraud, wilful misstatement, or suppression of material facts. The credit reversal and subsequent recredit were traceable to disclosed accounting mistakes, and the assessee had placed the relevant facts before the department. In the absence of concealment, the extended period could not be invoked merely because a contrary view was later taken on the admissibility of recredit.
Conclusion: Invocation of the extended period of limitation was unsustainable.
Final Conclusion: The demand, interest, and penalty were set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: A recredit made to correct an excess reversal caused by an evident mistake is not barred merely because it is taken suo motu, and the extended limitation period cannot be invoked without proof of suppression, fraud, or wilful misstatement.
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