Refund of MODVAT credit payment rejected where investigation-linked payment was treated as discharge of inadmissible credit, not a deposit.

An amount paid during investigation towards disputed MODVAT credit, where the assessee had already linked the payment to the inadmissible credit and had not pursued admissibility in earlier proceedings, is not to be treated as a refundable deposit. The Tribunal applied the principle that a party cannot later take a contrary stand on the character of such payment, and held that the first appellate view treating it as a deposit was incorrect. Refund was therefore not maintainable, the Revenue's appeal succeeded, and the original rejection of refund was restored.

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Issues: Whether refund could be claimed of MODVAT credit paid back during investigation, or whether the amount was a voluntary payment towards inadmissible credit and therefore not refundable as a deposit.

Analysis: The amount was paid after investigation had commenced and was specifically linked by the assessee to the MODVAT credit taken on the disputed invoices. The assessee had also not pursued the admissibility of the credit in the earlier round of litigation. On the facts, the payment could not be treated as a mere deposit with the department. The reasoning adopted by the first appellate authority that there was no admission of liability was held to be incorrect. The Tribunal applied the principle that a party cannot later take a contrary stand after having treated the payment as connected with inadmissible credit.

Conclusion: The refund was not maintainable. The payment was treated as discharge of improperly taken credit, not as a refundable deposit, and the Revenue's appeal succeeded.

Final Conclusion: The order granting refund was set aside and the original rejection of refund was restored.

Ratio Decidendi: An amount paid during investigation towards disputed MODVAT credit, and not challenged on its admissibility in the earlier proceedings, is to be treated as payment of the inadmissible credit and not as a refundable deposit.

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