Express statutory machinery required for recovery of Modvat credit reversal, with interim relief conditioned on quantified reversal.

Recovery of credit attributable to inputs used in both exempted and dutiable manufacture was treated as requiring an express statutory machinery provision; legislative intention alone was held insufficient to support recovery. The note also records that, although the Board's circular required reversal of credit in such cases, the precise quantum was not previously determined on the record and could not be verified. On those facts, interim relief was granted by waiving the demanded pre-deposit and penalties and staying recovery, subject to reversal of a quantified amount in the Modvat account as a condition for relief.

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Issues: Whether the amount demanded under Rule 57CC could be recovered in the absence of a specific machinery provision, and whether waiver of pre-deposit and stay of recovery were warranted on the facts.

Analysis: The demand arose from alleged failure to reverse credit taken on duty-paid inputs used for both exempted and dutiable products. The Tribunal held that legislative intention alone was insufficient to sustain recovery unless supported by an express statutory mechanism. It noted the Board's circular requiring reversal of credit in such cases, but the exact quantum of reversable credit was not previously determined and could not be verified on the record. In these circumstances, the Tribunal considered it appropriate to direct reversal of a quantified amount in the Modvat account as a condition for granting interim relief.

Conclusion: The assessee was granted waiver of the demanded deposit and penalties, and recovery was stayed, subject to reversal of Rs. 7.50 lakhs in the Modvat account.

Ratio Decidendi: Recovery of an amount attributable to credit taken on inputs used in exempted manufacture requires an express statutory machinery provision, and interim relief may be conditioned on reversal of the credit where the precise amount is not otherwise verifiable.

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