Modvat credit recovery fails where departmental knowledge exists and no suppression is shown; extended limitation cannot be invoked.

Modvat credit recovery for allegedly wrongful availment was treated as time-barred where the department had contemporaneous knowledge of the inputs, manufacture and clearances, and no suppression, misstatement or collusion was shown. In the absence of an express limitation in Rule 57-I, a reasonable period of limitation was read into the rule, so recovery could not proceed beyond that period. Duty demands on cables complete cleared as spares also failed on the facts because non-declaration as a finished product did not, by itself, justify invocation of the extended limitation under Section 11A when the department knew of the clearances and duty was debited through RG 23A Part II.

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Issues: (i) Whether recovery of Modvat credit allegedly wrongly taken was barred for want of suppression or misstatement and in the absence of an express limitation in Rule 57-I; (ii) Whether duty on cables complete cleared as spares could be demanded on the footing that they were not declared as finished products under Rule 57G and therefore could not be paid through RG 23A Part II.

Issue (i): Whether recovery of Modvat credit allegedly wrongly taken was barred for want of suppression or misstatement and in the absence of an express limitation in Rule 57-I.

Analysis: The inputs and the conversion of cables in length into cables complete were disclosed to the department through the classification list, price list, returns and the permissions for removal under Rule 57F(2). The department was aware that the goods were being cleared and that duty was being debited through RG 23A Part II. In the absence of any allegation of suppression, misstatement or collusion, and applying the principle that a reasonable period of limitation is to be read into a provision where none is expressly provided, the demand for recovery could not survive beyond the permissible period.

Conclusion: The demand for recovery of Modvat credit was not sustainable on limitation grounds, and no suppression was established against the assessee.

Issue (ii): Whether duty on cables complete cleared as spares could be demanded on the footing that they were not declared as finished products under Rule 57G and therefore could not be paid through RG 23A Part II.

Analysis: Although cables complete had not been separately declared as a finished product, the department had full knowledge of their manufacture, clearance and use. The payment through RG 23A Part II was treated as a mode of duty payment, and the department could not, on the facts, invoke the extended period merely because the duty was not paid through PLA. Since there was no suppression, the longer limitation under Section 11A was unavailable for the demand relating to these clearances.

Conclusion: The demand for duty on cables complete was not enforceable by invoking the extended period, and the assessee's position was upheld.

Final Conclusion: The appeal failed in entirety because the department did not establish suppression and the demands were held to be time-barred on the facts.

Ratio Decidendi: Where the department has contemporaneous knowledge of the manufacture and clearance of goods, and no suppression or misstatement is shown, a demand for Modvat-related recovery cannot be sustained by invoking the extended period of limitation; a reasonable limitation will be read into the rule where none is expressly provided.

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