Compounded Levy Scheme and Modvat credit lapse: only unutilised credit on the relevant date can lapse, not credit already used.

On opting for the Compounded Levy Scheme, only Modvat credit remaining unutilised on the relevant date could lapse; credit already utilised towards duty payment before the change could not be treated as recoverable merely because the final product later fell under that scheme. On the admitted facts, only a small balance remained in the Modvat account on the relevant date, while the rest had already been used. Accordingly, only the unutilised credit was liable to lapse, and the utilised credit was not recoverable.

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Issues: Whether, on opting for the Compounded Levy Scheme, only the unutilised Modvat credit lying in stock on the relevant date was liable to lapse and the credit already utilised for payment of duty was recoverable.

Analysis: The relevant principle applied was that only credit remaining unutilised on the date of shifting to the Compounded Levy Scheme could lapse. Credit already utilised towards payment of duty before the option for the scheme could not be treated as recoverable merely because the final product later came under a scheme where unutilised credit stood lapsed. On the admitted facts, a sum of Rs. 19,790/- alone remained in the Modvat account on the relevant date, while the balance had already been utilised.

Conclusion: Only the unutilised credit of Rs. 19,790/- was liable to lapse. The utilised credit was not recoverable.

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