Continuous disclosure in returns bars extended limitation, but continued inadmissible Modvat credit can still attract penalty.

Continuous disclosure of the relevant facts in monthly returns and RT-12 statements negatives suppression for extended limitation under Section 11A, even where Modvat credit on HDPE sacks was wrongly continued after a clear amendment to Rule 57A. The demand was therefore not sustainable on limitation. However, the continued availment of inadmissible credit after the amendment showed fault on the assessee's part, so penalty remained justified notwithstanding disclosure of the factual position. The stated ratio is that full disclosure in statutory returns protects against the extended period, but it does not prevent penalty where the assessee persists in claiming a withdrawn benefit.

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Issues: (i) whether the extended period of limitation under Section 11A could be invoked for recovery of wrongly availed Modvat credit on HDPE sacks after the amendment to Rule 57A; (ii) whether penalty was justified despite disclosure of the factual position in monthly returns.

Issue (i): whether the extended period of limitation under Section 11A could be invoked for recovery of wrongly availed Modvat credit on HDPE sacks after the amendment to Rule 57A.

Analysis: The amendment by Notification No. 35/90 made the position regarding ineligibility of Modvat credit on the relevant HDPE bags and sacks clear, and the assessee ought to have stopped availing the benefit after the amendment. However, the record showed that the assessee continued to reflect the bags and sacks in its monthly statements and RT-12 returns, thereby keeping the department informed of the factual position. In those circumstances, no suppression of facts or misstatement could be attributed to the assessee, and the basis for invoking the longer limitation period was not made out.

Conclusion: The extended period of limitation was not available to the department, and the demand was not sustainable.

Issue (ii): whether penalty was justified despite disclosure of the factual position in monthly returns.

Analysis: Although the assessee had disclosed the relevant facts regularly, it nonetheless continued to take credit after the amendment had clearly withdrawn the benefit. The continued availment of inadmissible credit showed fault on the assessee's part, even though it did not amount to suppression for limitation purposes. Penalty was therefore supportable on the footing that the assessee persisted in claiming a benefit that was no longer available.

Conclusion: Penalty was justified and was confirmed.

Final Conclusion: The demand was set aside because the extended limitation could not be invoked, but the penalty was sustained because the assessee continued to avail inadmissible Modvat credit after the amendment.

Ratio Decidendi: Continuous disclosure of the relevant facts in statutory returns negatives suppression for the purpose of extended limitation, even where the assessee wrongly continues to avail a benefit that has been withdrawn by a clear amendment.

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