Modvat credit reversed under protest may be re-credited suo motu without a refund claim when the Department remains inactive.

Modvat credit reversed under protest may be restored suo motu when the assessee has promptly sought permission to re-credit and the Department takes no action to regularise the position. Where no show cause notice or adjudication order has denied the credit, a refund claim under Section 11B of the Central Excise Act is not mandatory before re-credit is taken. The Tribunal accepted that departmental inactivity, after acknowledgment of the protest and request for restoration, did not bar re-credit.

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Issues: Whether Modvat credit, once reversed under protest and followed by a request to the Department to permit re-credit, could be taken back suo motu without first filing a refund claim under Section 11B of the Central Excise Act, 1944.

Analysis: The credit had been reversed under protest, the protest letter was acknowledged by the Department, and a further request was made to allow the credit, but no action was taken by the Department to regularise the matter. No show cause notice or adjudication order denying the credit had been issued. In these circumstances, and following the earlier Tribunal view relied upon by the Commissioner (Appeals), the Departmental objection that a refund claim under Section 11B was mandatory was not accepted.

Conclusion: The suo motu re-credit was held to be permissible and the Revenue's challenge failed.

Ratio Decidendi: Where Modvat credit is reversed under protest and the assessee has approached the Department for permission to re-credit, the credit may be restored suo motu if the Department remains inactive and no adjudication has denied the credit, without insisting on a refund claim under Section 11B.

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