Limitation on MODVAT credit recovery governed by the show cause notice date, making the demand time-barred.

Recovery of wrongly availed MODVAT credit under Rule 57I was treated as subject to the limitation principle reflected in Section 11A of the Central Excises and Salt Act, 1944. The majority view applied the law in force on the date of issuance of the show cause notice and found that recovery proceedings initiated beyond the permissible period were time-barred. Although the credit had been taken on invoices issued by a depot covered by relevant trade notices, the demand could not be sustained on limitation grounds, and the assessee succeeded.

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Issues: Whether the demand for recovery of wrongly availed MODVAT credit was barred by limitation under Rule 57I of the Central Excise Rules, 1944.

Analysis: The credit was taken under the MODVAT scheme on the strength of invoices issued by a depot covered by the relevant trade notices, and the dispute turned substantially on the period within which recovery could be made. The majority view held that, for recovery of wrong MODVAT credit, Rule 57I had to be read with the limitation principle reflected in Section 11A of the Central Excises and Salt Act, 1944, and that the law in force on the date of issuance of the show cause notice governed the recovery proceedings. The contrary view treated the amended rule as applicable and held the demand to be within time, but the majority preferred the view that the recovery action was time-barred.

Conclusion: The demand was barred by limitation and the appeal was allowed in favour of the assessee.

Final Conclusion: Recovery of the disputed MODVAT credit could not be sustained on limitation grounds, and the assessee succeeded.

Ratio Decidendi: Recovery of wrong MODVAT credit is subject to the limitation applicable to duty recovery proceedings, and where the show cause notice is issued beyond the permissible period, the demand is time-barred.

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