Limitation for Modvat credit reversal runs from the date credit is taken, making the demand time-barred here.

For a demand under Rule 57U(1) of the Central Excise Rules, 1944, limitation runs from the date credit is taken, not from the filing of RT-12 returns. On that basis, the notice was held to be issued beyond the six-month period and the demand for reversal of Modvat credit was time-barred. The merits of whether the testing equipment qualified as capital goods were not examined because the matter was disposed of on limitation, and the disallowance of credit did not survive.

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Issues: Whether the demand for reversal of Modvat credit was barred by limitation under Rule 57U(1) of the Central Excise Rules, 1944.

Analysis: Rule 57U(1) provided a six-month period for issuance of notice from the date on which credit was taken. The governing date for computation of limitation was therefore the date of taking credit and not the date of filing of RT-12 returns. Applying that rule to the credits taken on the relevant bills of entry, the notice was found to have been issued beyond the prescribed period. The merits of eligibility of the testing equipment as capital goods were not examined because the appeal was disposed of on limitation.

Conclusion: The demand was time-barred and the assessee succeeded on limitation.

Final Conclusion: The impugned order was set aside and the disallowance of credit did not survive.

Ratio Decidendi: For a demand under Rule 57U(1) of the Central Excise Rules, 1944, the limitation period begins from the date of taking credit, and not from the date of filing of RT-12 returns.

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