Modvat credit cannot be retrospectively recovered after scheme withdrawal, and extended limitation fails without suppression or misstatement.

Modvat credit validly taken and utilised during the currency of the scheme could not be recovered merely because the scheme was later withdrawn and the inputs remained in stock when the final product ceased to be specified goods, absent any express provision authorising retrospective reversal. The Tribunal held that a credit right crystallised under the concession could not be taken away by later notification changes, especially where the final product remained dutiable. The extended limitation period was also unavailable because the record disclosed no collusion, wilful misstatement, or suppression of facts; at most, the dispute reflected a mistaken legal view. The demand was therefore unsustainable.

---

---

Issues: (i) Whether Modvat credit validly taken and utilised before withdrawal of the scheme could be reversed or recovered merely because the inputs remained in stock and were used after the final product ceased to be specified goods. (ii) Whether the extended period of limitation was available on the facts on the ground of collusion, wilful misstatement, or suppression of facts.

Issue (i): Whether Modvat credit validly taken and utilised before withdrawal of the scheme could be reversed or recovered merely because the inputs remained in stock and were used after the final product ceased to be specified goods.

Analysis: The governing scheme permitted inputs to be used in or in relation to the manufacture of final products, and there was no specific provision authorising recovery of credit validly taken and utilised before withdrawal of the facility. The Tribunal followed its earlier decision on an identical factual situation and also relied on High Court rulings holding that a credit right crystallised during the currency of the scheme could not be taken away retrospectively by withdrawal of the notification or scheme, especially where the final product continued to be dutiable and was not exempt. The interpretation adopted by the Collector, including reliance on the expression specified goods and the treatment of the inputs as removable goods under a different rule, was held to be impermissible.

Conclusion: The recovery of Modvat credit was not sustainable, and the assessee was entitled to retain the credit already validly taken and utilised.

Issue (ii): Whether the extended period of limitation was available on the facts on the ground of collusion, wilful misstatement, or suppression of facts.

Analysis: The record did not disclose collusion, wilful misstatement, or suppression. The credit had been taken and utilised when permissible, and even on the Department's contrary view the matter would at most fall within error, omission, or misconstruction. The invocation of the longer period was therefore not justified.

Conclusion: The extended period of limitation was not attracted.

Final Conclusion: The impugned demand and findings were set aside, and the appeal succeeded with consequential relief to the assessee.

Ratio Decidendi: Credit validly earned and utilised under a statutory concession scheme cannot be retrospectively recovered merely because the scheme is withdrawn later, unless the governing provision expressly authorises such recovery; in the absence of suppression, collusion, or wilful misstatement, the extended limitation period cannot be invoked.

---