MODVAT credit refund cannot be denied on mere possibility of domestic utilisation when composite accounts show unutilised balance.

Refund of unutilised MODVAT credit under Rule 57F(13) could not be refused merely because the credit might have been capable of use for home clearances. The credit entries in the export and domestic RG23A Part II registers had to be read together as a composite account, and wrong debit entries later corrected by corresponding adjustments did not by themselves show exhaustion of the accumulated balance. Where the records showed unutilised credit and adjustment was not possible, refund remained payable. On that basis, rejection of the refund claim was unsustainable and consequential relief followed.

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Issues: Whether refund of unutilised MODVAT credit under Rule 57F(13) could be denied on the premise that the credit was capable of being utilised for clearances for home consumption, and whether the entries in the export and domestic registers justified rejection of the refund claim.

Analysis: The claim arose from accumulated MODVAT credit lying in separate export and domestic RG23A Part II registers maintained for accounting convenience. The rejection was founded on the view that the assessee could utilise the credit for duty on home clearances and that the balance in the export register was insufficient after accounting for returned goods. The record showed that the assessee had made wrong debit entries in the export register, later corrected by corresponding entries in the domestic register, and that both registers had to be read together as a composite account. The available material did not support the conclusion that the accumulated credit stood exhausted or that the refund claim lacked balance. Rule 57F(13) permits refund where adjustment is not possible, and the denial of refund on the facts recorded below proceeded on an erroneous understanding of the registers and the rule.

Conclusion: The refund could not be denied merely because the credit might have been capable of utilisation for home clearances, and the assessee was held entitled to the refund claim.

Final Conclusion: The impugned rejection of refund was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where accumulated MODVAT credit is shown to be unutilised on a composite reading of the relevant accounts, refund under Rule 57F(13) cannot be refused merely on a speculative assumption that the credit could have been used for domestic clearances.

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