Modvat credit limitation bar: prior departmental knowledge can prevent use of the extended period for an earlier demand.

The article addresses limitation in recovery of Modvat credit and the scope of the extended period. It states that where the department was already aware of the alleged wrong availment through an earlier show cause notice, a later demand for an earlier period could not be sustained by invoking the extended limitation period. Reliance is noted on Tribunal decisions supporting the principle that prior departmental knowledge and an already raised normal-period demand defeat a subsequent time-barred demand for the same issue. The stated conclusion is that the recovery demand was barred by limitation and the extended period was not available.

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Issues: Whether the demand for recovery of Modvat credit was barred by limitation and whether the extended period could be invoked.

Analysis: The dispute turned on whether the department was already aware of the alleged wrong availment of credit from the earlier show cause notice and whether, in such circumstances, a subsequent notice for the earlier period could sustain by invoking the extended period of limitation. The earlier Tribunal decisions relied upon supported the proposition that once the department had knowledge and a demand for the normal period had already been raised, a later demand for an earlier period could not be upheld on limitation grounds.

Conclusion: The demand was held to be barred by limitation and the extended period was not sustainable.

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