Re-credit of reversed Modvat credit after licence cancellation was held not to attract the six-month limitation rule.

Modvat credit validly availed within the prescribed period and later reversed on exports could be re-credited after cancellation of advance licences without breaching Rule 57G(2). The later book entry was only a restoration of credit earlier debited when goods were exported under the DEEC scheme, not a fresh taking of credit on old invoices. Once the licences were cancelled, entitlement to the earlier reversed credit revived, so the six-month limitation did not apply to the re-crediting of credit already earned.

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Issues: Whether Modvat credit, originally taken within the prescribed period and thereafter reversed on exports, could be re-credited after cancellation of the advance licences without contravening the six-month limitation under Rule 57G(2).

Analysis: The credit had been validly availed on the basis of the invoices within six months from their date of issue. The subsequent entry made by the assessee was not the first availment of credit on old invoices, but only a restoration of credit earlier reversed when the goods were exported under the DEEC scheme. Once the advance licences were cancelled, the assessee again became entitled to the credit that had been reversed. In that situation, the later book entry merely corrected the earlier debit and did not amount to a fresh taking of credit beyond the prescribed period. Rule 57G(2) therefore had no application to the re-crediting of an already earned credit.

Conclusion: The objection based on limitation under Rule 57G(2) was untenable, and the re-credit was held to be permissible.

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