Deemed Modvat credit on non-duty-paid inputs was denied, with suppression supporting extended limitation and penalty.

Deemed Modvat credit was held inadmissible on inputs sourced from a supplier operating under an unconditional exemption, because the goods were non-duty-paid. The Revenue was not required to separately prove the non-duty-paid character where that factual position was admitted. Misdescription of the goods and an uncontroverted confessional statement supported a finding of suppression, so the extended limitation period was sustained. On that basis, the demand was upheld and the penalty was not treated as excessive.

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Issues: Whether deemed Modvat credit was admissible on inputs which were non-duty-paid and whether the demand and penalty were sustainable, including on limitation.

Analysis: The inputs were admittedly sourced from a supplier who was availing an unconditional exemption notification, and the goods were therefore non-duty-paid. The challenge that the Revenue had to separately prove the non-duty-paid character of the inputs was rejected in view of the admitted factual position. On limitation, the record indicated misdescription of the goods and reliance on an uncontroverted confessional statement, which supported the finding that the relevant facts were suppressed from the department. The plea that deemed credit was unavailable on non-duty-paid goods was also noted as being contrary to the settled position reflected in prior orders on the same facility.

Conclusion: The demand was held to be valid, the extended period was sustained, the penalty was not found excessive, and the appeal was rejected.

Ratio Decidendi: Deemed credit cannot be taken on inputs that are non-duty-paid, and where misdescription and suppression are established, the extended period and consequential penalty are sustainable.

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