Modvat credit limitation runs from the date of taking credit, not later utilisation, so the demand was time-barred no longer.

For recovery of wrongly taken Modvat credit, limitation runs from the date the credit is taken, not from the date it is later utilised for duty payment. The notice in issue, which related to credit taken on gate passes during the relevant period, was issued within six months of those credit entries and was therefore within time. The argument that limitation should be computed only from utilisation was rejected because credit recorded in RG 23A Part II forms part of a running balance and the particular credit used cannot ordinarily be identified date by date. The limitation objection failed, and the demand was upheld in favour of the Revenue.

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Issues: Whether the notice proposing recovery of Modvat credit was barred by limitation, and whether limitation had to be computed from the date of taking credit or from the date of utilisation of the credit.

Analysis: The notice specifically related to credit taken on gate passes during the relevant period. On that footing, it was issued within six months from the dates of taking credit and was therefore within time. The view that limitation should run from the date of actual utilisation of the credit was rejected, because credit entered in RG 23A Part II forms part of a running balance and the particular credit utilised for payment of duty cannot ordinarily be identified on a date-wise basis. The conclusion that the Assistant Collector had wrongly ignored the date of taking credit was held to be unsustainable.

Conclusion: The limitation objection failed, and the demand was held to be within time, in favour of the Revenue.

Ratio Decidendi: For recovery of wrongly taken Modvat credit, limitation is to be computed from the date on which the credit is taken, not from the date on which the credit is subsequently utilised for payment of duty.

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