Transitional credit refund allowed where blocked credit could no longer be utilised after leaving the Modvat/Cenvat framework.

Cash refund of unutilised transitional credit under Rule 57H of the erstwhile Central Excise Rules, 1944 was allowed where the credit remained blocked due to departmental objections for years and the assessee had moved out of the Modvat/Cenvat framework, making practical utilisation impossible. The reasoning applied the principle that transitional credit provisions should not be interpreted so as to defeat credit legitimately earned when the assessee was prevented from availing it for reasons not attributable to its fault. Although a contrary Larger Bench view was noted, the refund-favouring view supported by High Court authority was followed, and cash refund was held admissible.

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Issues: Whether the assessee was entitled to cash refund of unutilised transitional credit under Rule 57H of the erstwhile Central Excise Rules, 1944.

Analysis: The credit had remained unavailable because of departmental objections, and the dispute continued for years. The assessee had also moved out of the Modvat/Cenvat framework and could not now effectively utilise the credit. The order relied on the principle that transitional credit provisions should not defeat the benefit where the assessee was prevented from availing credit for reasons not attributable to its fault, and where refusal of refund would leave the credit incapable of use. The contrary view of the Larger Bench was noted, but the view favourable to refund, supported by High Court authority, was followed.

Conclusion: The assessee was entitled to cash refund of the transitional credit.

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