Modvat credit cannot be denied for a procedural omission when facts were disclosed and verified by the Department.

Full disclosure of the relevant facts and departmental verification of the inputs meant there was no suppression or withholding of information, so the extended period of limitation could not be invoked. A Modvat credit claim was also not defeated merely because the application did not expressly refer to Rule 57H, as the omission was treated as a procedural lapse where the declaration, separate request, and departmental endorsement showed the substantive entitlement. On that basis, the penalty imposed under Rule 173Q was also unsustainable and the assessee obtained consequential relief.

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Issues: (i) whether the extended period of limitation could be invoked for disallowance of Modvat credit in the facts of the case; (ii) whether Modvat credit could be denied merely because the application did not specifically mention Rule 57H of the Central Excise Rules, 1944, and whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Issue (i): whether the extended period of limitation could be invoked for disallowance of Modvat credit in the facts of the case

Analysis: The declaration and subsequent correspondence showed full disclosure of the relevant facts to the Department. The inputs, the claims for credit, and the verification by departmental were all within the knowledge of the Department. In such a situation, there was no basis to allege suppression or withholding of information so as to justify the longer limitation period.

Conclusion: The extended period of limitation was not invocable against the assessee.

Issue (ii): whether Modvat credit could be denied merely because the application did not specifically mention Rule 57H of the Central Excise Rules, 1944, and whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable

Analysis: The assessee had filed the Modvat declaration and had separately sought permission for credit on inputs lying in stock and inputs received during the relevant period. Non-mention of the specific rule was treated as a technical lapse, not as a defect destroying the underlying entitlement. The Department had verified the inputs and made endorsement in the records, showing that the matter was one of procedure rather than substance. Since the credit claim was not liable to be rejected on that ground, the penalty based on such rejection also could not survive.

Conclusion: Modvat credit could not be denied on the ground of omission to cite Rule 57H, and the penalty was unsustainable.

Final Conclusion: The impugned order was set aside and the assessee's appeal succeeded with consequential relief.

Ratio Decidendi: Where the material facts are fully disclosed and the Department has verified the claim, a procedural omission in the application for Modvat credit does not defeat the substantive benefit, and suppression cannot be inferred to extend limitation.

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