Modvat re-credit barred after mistaken duty payment; refund under statutory procedure required instead.

Where duty was cleared by debiting Modvat credit and the assessee later treated the payment as a wrong provision, unilateral re-credit in the Modvat account was not permitted. The tribunal treated the transaction as an erroneous duty payment at clearance, not a mere internal correction of credit entries, so the proper remedy was a refund claim under the statutory refund mechanism. Authorities cited on adjustment or re-credit were distinguished on their facts because they involved different credit-entry situations. Re-credit was disallowed and the statutory refund route under Section 11B was required; the demand and penalty were upheld.

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Issues: Whether duty paid by debiting Modvat account on clearance of goods, if subsequently found to have been paid under the wrong provision, could be re-credited in the Modvat account or whether the assessee was required to seek refund under Section 11B.

Analysis: The goods were cleared on payment of duty by debiting the Modvat account, and the assessee later deposited duty in PLA and re-credited the earlier debit. The adjustment was not a mere correction of an internal Modvat entry but an erroneous payment of duty at the time of clearance. On these facts, the proper remedy was a refund claim under the statutory refund provision. The cited precedents were found inapplicable because they involved different factual situations concerning adjustment or re-credit of credit entries.

Conclusion: Re-credit was not permissible on these facts, and the assessee was required to pursue refund under Section 11B. The demand and penalty were upheld.

Ratio Decidendi: Where duty is mistakenly paid at clearance by debiting Modvat credit, the assessee cannot unilaterally re-credit the amount in the Modvat account and must seek refund under the statutory refund mechanism.

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