Modvat re-credit for excess duty paid was allowed where rebate sanction reflected departmental confirmation of revised assessable value.

Excess duty paid on a higher assessable value can be re-credited in the Modvat account without separate prior permission where the rebate sanction order itself reflects departmental confirmation of the revised value. The CESTAT noted that, although the normal course would be to challenge the rebate sanction order rather than make a suo motu entry, the endorsement on the sanction order showed that the reduction was made with the claimant and jurisdictional Superintendent's confirmation. In these peculiar facts, the re-credit merely neutralised duty paid in excess, and a denial based only on technical or procedural objections was unsustainable.

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Issues: Whether the assessee was entitled to re-credit the amount in its Modvat account without obtaining specific permission from the excise authorities, in the facts where excess duty had been paid and the rebate sanction order carried an endorsement suggesting revision of assessable value with departmental approval.

Analysis: The assessee had initially debited duty on a higher assessable value and, upon rebate sanction, the duty element was recalculated downward, reducing the rebate by the disputed amount. Although the ordinary course would have been to challenge the rebate sanction order rather than make a suo motu entry, the endorsement on the sanction order indicated that the deduction was made in confirmation of the assessable value by the claimant and the jurisdictional Central Excise Superintendent. In these peculiar circumstances, the re-credit merely neutralised duty paid in excess, and the denial proposed on purely technical and procedural grounds was not warranted.

Conclusion: The assessee was entitled to the re-credit, and the denial of Modvat credit was unsustainable.

Ratio Decidendi: Where excess duty has been paid and the rebate sanction order itself indicates departmental confirmation of the revised assessable value, re-credit in the Modvat account is permissible notwithstanding the absence of a separate prior permission, particularly when the objection is purely technical and procedural.

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