Settlement Commission proceedings did not bar Modvat credit proceedings; unilateral re-credit without proper officer sanction was held impermissible.

Settlement Commission proceedings did not bar the Department from issuing show-cause notices on reversal and re-credit of Modvat credit because that issue had not been examined by the Commission and was not treated as completed proceedings for invoking Section 32H; the preliminary objection was rejected. Credit reversed in the statutory returns at the instance of the Range Officer could not be re-credited suo motu without sanction of the proper officer, as the governing law contained no enabling provision for unilateral re-credit and the Larger Bench view controlled the dispute; the assessee's authorities were distinguished on facts. The Commissioner's orders were sustained and the appeals failed.

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Issues: (i) whether the Settlement Commission proceedings barred the Department from issuing the show-cause notices concerning reversal and re-credit of credit; (ii) whether credit reversed at the instance of the Range Officer could be re-credited later without the sanction of the proper officer.

Issue (i): whether the Settlement Commission proceedings barred the Department from issuing the show-cause notices concerning reversal and re-credit of credit.

Analysis: The question of reversal of credit and subsequent re-credit was not examined by the Settlement Commission. The Commission noted that the issue was pending before the Tribunal and also stated that it was not proper to reopen the modvat credit issue, since it could not be treated as completed proceedings for invoking Section 32H of the Central Excise Act.

Conclusion: The preliminary objection was rejected.

Issue (ii): whether credit reversed at the instance of the Range Officer could be re-credited later without the sanction of the proper officer.

Analysis: The Tribunal followed the Larger Bench view that there is no provision permitting suo motu re-credit without departmental approval. The reversal made by the assessee had been reflected in the statutory returns and approved by the proper officer, so the assessee was required to obtain sanction before taking re-credit of the same amount. The authorities cited for the assessee were distinguished on facts, and the Larger Bench ruling was treated as governing the dispute.

Conclusion: Re-credit without sanction was impermissible and the issue was decided against the assessee.

Final Conclusion: The orders of the Commissioner were sustained on the merits and the appeals failed.

Ratio Decidendi: Credit reversed in the statutory records on departmental insistence cannot be re-credited suo motu without the sanction of the proper officer where the governing law contains no enabling provision for such unilateral re-credit.

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