Modvat credit could not settle pre-scheme duty; payment had to be made through PLA or cash.

Duty for clearances made before the Modvat scheme came into operation could not be discharged by debiting RG-23A Part-II. Credit under Rule 57F was available only for utilisation of duty credit on inputs received after the scheme began and in accordance with the declaration under Rule 57G. For earlier clearances, duty had to be paid through PLA or TR-6 challan, and RG-23A Part-II debit was not a valid mode of payment. The assessee was therefore not entitled to use Modvat credit to satisfy the pre-Modvat demand, and payment through cash or PLA was required.

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Issues: Whether duty liability on clearances made prior to introduction of the Modvat scheme could be discharged by debiting the RG-23A Part-II account.

Analysis: The credit mechanism under Rule 57F was available only for utilization of duty credit on inputs in accordance with the declaration under Rule 57G. Since the inputs on which credit was taken were received after the Modvat scheme came into operation, such credit could be used only for payment of duty on final products cleared after receipt of those inputs. For earlier clearances, payment had to be made through PLA or TR-6 challan, and debit in RG-23A Part-II was not a valid discharge of the demand.

Conclusion: The assessee was not entitled to pay the pre-Modvat duty demand through RG-23A Part-II, and the insistence on payment through PLA or cash was upheld.

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