Modvat credit demand barred by limitation where facts were disclosed in returns; penalty reduced accordingly.

A demand for reversal of Modvat credit was treated as time-barred for the portion raised beyond six months, because the relevant facts had already been disclosed in the RT 12 returns and were within the Department's knowledge. Mere non-payment of the amount reflected in the assessment memorandum did not justify invocation of the extended limitation period. As the larger part of the demand failed on limitation, the penalty was reduced correspondingly. The demand for the period beyond six months was set aside.

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Issues: Whether the demand for reversal of Modvat credit was barred by limitation in respect of the period beyond six months from the show cause notice, and whether the penalty required reduction in consequence.

Analysis: The demand had been reflected in the RT 12 returns, which meant the Department had knowledge of the relevant facts. Mere non-payment of the amount demanded in the assessment memorandum did not justify invocation of the extended period of limitation. Since the demand was raised on the basis of facts already within the Department's knowledge, the part of the demand covering the period beyond six months could not be sustained as time-barred. As the major portion of the demand failed on limitation, the penalty also required commensurate reduction.

Conclusion: The demand was held partly barred by limitation, the demand beyond the six-month period was set aside, and the penalty was reduced.

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