Recredit of reversed Modvat credit upheld where job-worked inputs returned after duty-paid clearance under prescribed procedure.

Recredit of Modvat credit reversed when iron ore fines were sent to a job worker was held permissible because the assessee followed the prescribed job work procedure under Rule 57F(4) of the Central Excise Rules, 1944. The processed pellets were received back and had been cleared on payment of duty by the job worker, and the assessee did not separately take credit of that duty. On those facts, the reversed amount could validly be recredited, and the impugned order was unsustainable.

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Issues: Whether the assessee was entitled to recredit the Modvat credit reversed at the time of dispatch of iron ore fines to a job worker, when the processed goods were received back and duty had been paid on their clearance.

Analysis: The assessee had followed the prescribed job work procedure under Rule 57F(4) of the Central Excise Rules, 1944 by sending iron ore fines for conversion into pellets and by reversing credit at the time of dispatch. The job worker converted the goods into pellets and cleared them on payment of duty under Rule 52A of the Central Excise Rules, 1944. The record showed no dispute that the processed pellets were received back and consumed by the assessee. In these circumstances, the reversed amount was only recredited, and the assessee did not take credit of the duty paid on the pellets separately.

Conclusion: The recredit was permissible and the impugned order was unsustainable.

Final Conclusion: The appeal was allowed and the assessee obtained consequential relief.

Ratio Decidendi: Where inputs are sent for job work under the prescribed procedure and the processed goods are received back after duty-paid clearance, recredit of the amount reversed at the time of removal is valid under Rule 57F(4) of the Central Excise Rules, 1944.

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