Modvat credit reversal on moulds sent to job workers was upheld where return within the prescribed period was not shown.

Modvat credit on moulds sent to job workers had to be reversed where the moulds were not received back within the prescribed three-month period and no extension was granted by the Commissioner. Rule 57-S(9) required an undertaking for return within that period or within any extended time, and Rule 57-S(10) treated non-return as requiring payment of duty equivalent to the credit taken. On the stated facts, the moulds remained unreturned for more than ten years, so the credit reversal was consistent with the rule and the confirming orders were upheld.

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Issues: Whether the Modvat credit taken on moulds sent to job workers and not returned within the prescribed period, without extension by the Commissioner, was liable to be reversed and whether the orders confirming such reversal were sustainable.

Analysis: Moulds were removed to job workers under Rule 57-S(8) of the erstwhile Central Excise Rules, 1944. Rule 57-S(9) required an undertaking to bring back the moulds within three months or within such extended period as the Commissioner might permit. Rule 57-S(10) provided that if the moulds were not received back within that period, duty equivalent to the credit taken on such moulds had to be paid. The moulds had not been received back even after more than ten years and no extension from the Commissioner was shown. The credit reversal made by the assessee therefore accorded with the rule.

Conclusion: The reversal of Modvat credit was in law and the orders of the lower authorities confirming it were upheld. The appeal failed.

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