Modvat credit reversal must be confined to credit actually taken, with recovery quantified under the proper reversal rule.

Modvat credit reversal for picture tubes had to be confined to the credit actually taken on the relevant inputs, not quantified on a notional uniform duty basis. The adjudicating authority's use of Rule 9A(4)(iii) of the Central Excise Rules, 1944 was incorrect; recovery was to be worked out under Rule 57I(2), which governed reversal of credit. Because seized records were needed to verify the precise credit entries, the matter was remitted for fresh determination of the recoverable amount after access to those records.

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Issues: Whether the demand for reversal of Modvat credit on picture tubes was to be quantified on the basis of the credit actually taken on the inputs and whether the adjudicating authority had applied the correct rule for recovery.

Analysis: The dispute concerned the amount of credit recoverable on picture tubes found unutilised or unsuitable for manufacture of television sets. The adjudicating authority had proceeded on a uniform duty rate and had invoked Rule 9A(4)(iii) of the Central Excise Rules, 1944. The correct approach, however, was to recover only the amount actually taken as credit on inputs that were not shown to have been utilised in the manner contemplated by the rules. The recovery therefore had to be determined under Rule 57I(2) of the Central Excise Rules, 1944. Since the seized records were still required to ascertain the precise credit entries, the matter needed fresh quantification after access to those records was given.

Conclusion: The application of Rule 9A(4)(iii) was held to be incorrect, and the amount recoverable was directed to be determined afresh on the basis of the credit actually taken.

Final Conclusion: The impugned order was set aside and the matter was remitted for fresh determination of the recoverable amount, with consequential relief to the extent permissible in law.

Ratio Decidendi: Where Modvat credit is sought to be reversed, the recovery must be confined to the credit actually taken on the relevant inputs and must be quantified under the provision governing reversal of credit, not on a notional uniform duty basis.

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