Lapsed Modvat credit under compounded levy scheme cannot be revived through TR-6 payment; refund upheld.

Modvat credit standing in RG 23A was treated as lapsed on the assessee opting for the compounded levy scheme, because Rule 57F(17) of the Central Excise Rules, 1944 did not permit such credit to be used for clearances of other goods after the change in scheme. Clearances made against a lapsed credit balance could not be regarded as duty-paid clearances, and the demand could not be regularised by creating a notional balance through TR-6 payment and then reversing it again. Since the deposit was made under departmental objection after the credit had already lapsed, the refund claim was sustainable and the amount deposited through TR-6 was refundable.

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Issues: Whether the Modvat credit balance standing in the RG 23A account had lapsed on the assessee opting for the compounded levy scheme, and whether the amount deposited through TR-6 under protest was refundable.

Analysis: Rule 57F(17) of the Central Excise Rules, 1944 made it clear that the credit balance could not be utilised for clearances of other goods after the relevant change in the scheme. Clearances effected against a lapsed credit balance could not be treated as duty-paid clearances, and the demand could not be regularised by subsequently creating a notional balance through TR-6 payment. An indirect method of first reviving the lapsed credit and then treating it as lapsed again was impermissible. Since the duty was deposited only because of the department's objection and the credit had already lapsed, the refund claim could not be faulted.

Conclusion: The lapse of Modvat credit was upheld, and the refund of the amount deposited through TR-6 was sustained in favour of the assessee.

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