Modvat credit adjustment for job-worker returns can be made in the personal ledger account, not Modvat alone.

Rule 57F(3)(a)(iii) was treated as an enabling provision that allowed credit to be taken when inputs returned from a job worker were received back, without confining adjustment to the Modvat account alone. Because Rule 173G contained no corresponding debit mechanism for inputs sent to the job worker, the supplement to the challan under Notification No. 28/96 supported adjustment either in the personal ledger account or in Modvat credit, depending on the original debit. The later requirement introduced from 1-9-97 by Notification No. 47/97 was not applied retrospectively. The assessee's personal ledger adjustment was therefore permissible and the departmental objection failed.

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Issues: Whether, on return of inputs sent to a job worker under Rule 57F(3)(a)(iii), the assessee was required to take the corresponding credit only in the Modvat account, or whether reversal and re-credit in the personal ledger account was permissible for the relevant period.

Analysis: Rule 57F(3)(a)(iii) was treated as an enabling provision allowing credit to be taken when the processed goods were returned by the job worker. The provision was not read as restricting the manner of adjustment to the Modvat account alone. Rule 173G did not contain any corresponding provision governing debit when inputs were sent to the job worker. The supplement to the challan prescribed by Notification No. 28/96 also indicated that the credit could be taken either in the personal ledger account or in Modvat credit, depending on the debit originally made. The later requirement introduced from 1-9-97 by Notification No. 47/97 was therefore not applied to the earlier period in dispute.

Conclusion: The assessee's adjustment in the personal ledger account was permissible and the departmental objection was rejected. The appeal failed.

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