Refund claims must be decided on the pleaded facts, with Modvat credit reversal and Rule 57F(1)(ii) applied on the correct footing.

Refund of copper waste and scrap cleared as such after reversal of Modvat credit had to be examined on the actual basis pleaded and proved, not on a manufactured-goods premise. The lower appellate authority granted relief by applying Notification No. 172/84 on the footing that the scrap had been manufactured, which did not match the claim. The Tribunal noted the relevance of Rule 57F(1)(ii), under which reversal of credit restores the original position, and held that the claim had not been considered on the correct factual and legal foundation. The refund order was set aside and the matter remanded for fresh adjudication.

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Issues: Whether the refund claim arising from clearance of copper waste and scrap after reversal of Modvat credit could be allowed on the basis of Notification No. 172/84 and Rule 57F(1)(ii) of the Central Excise Rules, 1944, and whether the matter required reconsideration by the lower appellate authority.

Analysis: The refund claim was founded from the outset on the assertion that the goods were cleared as such without manufacture and after reversal of Modvat credit. The lower appellate authority, however, granted relief by proceeding on the basis that the waste and scrap had been manufactured and by applying Notification No. 172/84 on that premise. The Tribunal held that this approach was inconsistent with the case actually pleaded. It also noted the relevance of the legal fiction under Rule 57F(1)(ii), under which the recipient reverses credit to restore the original position, and found that the earlier authority had not examined the claim on the correct factual and legal footing. In view of the Larger Bench decision relied upon, the matter needed fresh consideration.

Conclusion: The order allowing refund was set aside and the matter was remanded for de novo decision.

Ratio Decidendi: A refund or exemption claim must be decided on the actual basis pleaded and proved, and where the lower authority proceeds on a different premise without examining the correct factual and legal foundation, the matter is liable to be remanded for fresh adjudication.

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