Rule 56A credit recovery must follow the prescribed limitation period; extended time is unavailable without suppression or wilful misstatement.

Credit taken under Rule 56A could not be treated as merely provisional once permission to avail proforma credit had been granted, and recovery had to be made within the rule-prescribed period from the date of taking credit. In the absence of suppression of facts or wilful misstatement, the Department could not invoke the extended limitation period. Non-production of duty-paying documents and alleged non-compliance with Rule 56A did not by itself justify recovery where delivery challans and D-3 intimations showed no concealment. The majority view therefore treated the demand as time-barred and unsustainable on the alleged compliance breach.

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Issues: (i) whether the demand for recovery of credit taken under Rule 56A was barred by limitation; (ii) whether non-production of proper duty-paying documents and non-compliance with the requirements of Rule 56A justified the demand.

Issue (i): whether the demand for recovery of credit taken under Rule 56A was barred by limitation.

Analysis: The majority held that Rule 56A contained no basis for treating credit taken pending production of duty-paying documents as merely provisional after permission to avail proforma credit had already been granted. In the absence of any allegation of suppression of facts or wilful misstatement, the Department could not invoke the extended period. Recovery had therefore to be made within the period prescribed under the rule, counted from the date of taking credit.

Conclusion: The demand was time-barred and the extended period was not available to the Department.

Issue (ii): whether non-production of proper duty-paying documents and non-compliance with the requirements of Rule 56A justified the demand.

Analysis: The majority treated the delivery challans and the D-3 intimations as sufficient to show that the case did not involve suppression or wilful breach warranting the broader recovery period. Since the rule did not authorise conversion of the credit into a continuing provisional entry on the facts found, the departmental demand could not be sustained on that basis.

Conclusion: The demand was not justified on the ground of alleged non-compliance.

Final Conclusion: The majority view prevailed, the revenue appeal failed, and the demand was set aside as barred by limitation.

Ratio Decidendi: Where credit taken under Rule 56A is not supported by the statutory basis for treating it as provisional, recovery must be made within the limitation period prescribed for recovery of such credit, and the extended period is unavailable absent suppression or wilful misstatement.

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