Modvat credit could be used to offset differential duty demand, avoiding cash payment for the same period.

Differential duty demanded for a period when the assessee was operating under the Modvat scheme could be adjusted against the available credit in the RG 23 Part-II account, because the finished goods duty for that period had already been discharged through Modvat credit. The outstanding credit balance was sufficient for the demand, so there was no basis to require cash payment. The assessee was entitled to utilise the credit balance for the differential duty, and the demand did not have to be paid in cash.

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Issues: Whether the differential duty demand could be adjusted against the credit balance available in the appellant's RG 23 Part-II account during the period when the appellant was operating under the Modvat scheme.

Analysis: The demand related to a period when the appellant was admittedly working under the Modvat scheme and had a substantial credit balance in the inputs account. The duty on the finished goods had been being discharged through such credit, and there was no justification for denying use of the available balance for the differential duty demanded for the same period.

Conclusion: The appellant was entitled to adjust the differential duty from the outstanding Modvat credit balance, and the demand was not required to be paid in cash.

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