Lapsed MODVAT credit on SSI exemption switch-over was held not refundable under Rule 57H(7).

Unutilized MODVAT credit lying in the assessee's account on the date of switching to the SSI exemption scheme lapsed under Rule 57H(7) of the Central Excise Rules, 1944. On opting for exemption based on clearances, credit attributable to inputs in stock or used in finished goods was to be adjusted first, and any residual balance thereafter ceased to be available for duty payment. Because the claim sought refund of lapsed credit in RG 23A Part-II, rather than duty actually debited and paid, the earlier decision on refund of debited credit did not apply. Refund was therefore not admissible.

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Issues: Whether the unutilized MODVAT credit lying in the assessee's account on the date of opting for the SSI exemption scheme had lapsed under Rule 57H(7) of the Central Excise Rules, 1944 and was, therefore, not refundable.

Analysis: The appellant had switched over to the SSI exemption scheme from 1-4-1999. Under Rule 57H(7), when a manufacturer opts for exemption under a notification based on clearances in a financial year, the credit attributable to inputs in stock or used in finished goods is adjusted and any balance remaining thereafter lapses and cannot be utilized for payment of duty. The refund claim was not for duty actually debited and paid, but for the balance unutilized credit in RG 23A Part-II which had ceased to be available on 1-4-1999. The earlier decision relied upon concerned refund of duty debited in the credit account and did not govern a claim for refund of lapsed credit.

Conclusion: The balance MODVAT credit had lapsed on the assessee's switch-over to the SSI exemption scheme and was not refundable. The denial of refund was upheld.

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