Extended limitation and suppression in Modvat credit reversal rejected; demand held time-barred on the facts.

Extended limitation for duty and penalty under Modvat was not justified where the assessee had already corresponded with the department on reversal of credit attributable to inputs used in exempted products, and the department had accepted the working shown in RG-23A debits and monthly returns. On those facts, the omission to specify the description of dutiable and exempted final products in the Rule 57G declaration did not amount to suppression or misstatement. The manufacture pattern also varied from month to month, weakening any allegation of deliberate non-disclosure. The demand was therefore held time-barred and the duty and penalty were set aside.

---

---

Issues: Whether the demand of duty and penalty could be sustained by invoking the extended period on the basis of alleged non-declaration under Rule 57G, and whether the entire demand was barred by limitation.

Analysis: The appellants had been in correspondence with the departmental authorities regarding the manner in which Modvat credit attributable to inputs used in exempted final products was to be reversed. The department had itself directed a percentage-based working and had accepted the RG-23A debits and monthly returns. In those circumstances, the alleged failure to declare the description of dutiable and exempted final products in the declaration under Rule 57G could not justify an of suppression or misstatement. The pattern of manufacture varied from month to month, and the facts did not support invocation of the longer limitation period.

Conclusion: The extended period was not attracted, the demand was time-barred, and the duty and penalty were set aside in favour of the assessee.

---