Accumulated credit under Notification No. 27/87 remains valid post-rescission

The High Court ruled in favor of the petitioners, holding that the accumulated credit under Notification No. 27/87 remained valid post-rescission and could be utilized. The petitioners were found entitled to use the accrued credit as per the interim relief granted. The Court made the rule absolute in favor of the petitioners, with no costs awarded.

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Issues:
Challenge to letter denying utilization of accumulated credit under Notification No. 27/87, validity of Notification dated 25-8-1989, excess credit utilized under Notification Nos. 27/87 and 45/89, whether accumulated credit under Notification No. 27/87 can be availed post rescission, and adjustment of excess credit under Notification No. 45/89.

Analysis:
The petitioners contested a letter dated 6-9-1989, informing them of the inability to use accumulated credit due to rescission of Notification No. 27/87 and were asked to reverse a portion of the credit taken during a specific period. The High Court granted interim relief allowing the petitioners to continue using the accrued credit until 25-8-1989. The Apex Court in a related case clarified that the accumulated credit under Notification No. 27/87 remains valid even after rescission, but cannot be used alongside credit from subsequent notifications. Consequently, the petitioners were deemed entitled to utilize the accumulated credit, rendering the letter denying its utilization invalid.

The respondents alleged that the petitioners exploited the interim relief by utilizing credit from both Notification Nos. 27/87 and 45/89 simultaneously, contrary to the Apex Court's ruling. The excess credit utilized was claimed to be Rs. 16,43,710.50, and the respondents sought a refund. However, the High Court clarified that the issue raised solely concerned the accumulated credit under Notification No. 27/87, and any misuse of credit under Notification No. 45/89 was beyond the petition's scope. The Court emphasized that if the petitioners misused credit under Notification No. 45/89, the respondents could take appropriate legal action.

Despite an offer by the petitioners to deposit the excess credit used under Notification No. 45/89, subject to future utilization, the Revenue rejected it citing the absence of provisions for such adjustments under current Cenvat Rules. Consequently, the Court proceeded to decide the petition on its merits. The Court reiterated that the accumulated credit under Notification No. 27/87, even post-rescission, was a vested right that could be utilized by the petitioners. The petition succeeded on this ground, with the respondents granted the liberty to pursue lawful actions for any wrongful utilization of credit under Notification No. 45/89.

In conclusion, the High Court ruled in favor of the petitioners, holding that the accumulated credit under Notification No. 27/87 did not lapse post-rescission and could be rightfully utilized. The petitioners were found to have correctly utilized the accrued credit as per the interim order. The Court made the rule absolute in favor of the petitioners with no costs awarded.

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