Limitation for Modvat credit recovery runs from the date of taking credit; a delayed demand was held time-barred.

A limitation plea against recovery of wrongly availed Modvat credit may be raised at the appellate stage because it is a pure question of law. For the relevant period, limitation under Rule 57-I was computed from the date the credit was taken, and the limitation framework under Section 11A was treated as applicable even before the October 1988 amendment to Rule 57-I. Because the show cause notices were issued more than six months after the credits were taken, the demand was held time-barred and the assessee succeeded on the limitation issue.

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Issues: Whether the demand for recovery of wrongly availed Modvat credit was barred by limitation and could be challenged at the appellate stage.

Analysis: The limitation plea was a pure question of law and could be raised even though it had not been accepted at the earlier stage. Under Rule 57-I, as applicable to the material period, limitation was to be computed from the date of taking credit. The show cause notices were issued more than six months after the relevant credits were taken. The Tribunal also noted that the law on limitation under Section 11A applied even before the amendment of Rule 57-I in October 1988.

Conclusion: The demand was time-barred and the assessee succeeded on the limitation issue.

Ratio Decidendi: A plea of limitation, being a question of law, may be raised at any stage, and where recovery of Modvat credit is initiated beyond the permissible period computed from the date of taking credit, the demand is barred by limitation.

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