Remission of duty and Modvat credit reversal: demand could not stand after the settled entitlement was reopened.

Remission of duty for destroyed expired medicines having already been accepted, the authority on remand was confined to passing a speaking order after hearing the assessee and could not reopen that settled issue. The demand based on reversal of Modvat credit on inputs used in the finished goods failed because the assessee's eligibility to the credit had also been accepted. In the absence of a legal basis to require reversal of credit, the demand raised under Rule 9(2) read with Section 11A(1) of the Central Excise Act, 1944 was unsustainable and was set aside.

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Issues: Whether the demand confirmed on the footing that Modvat credit on inputs used in the manufacture of goods destroyed after expiry had to be reversed, despite the assessee having already been found eligible for remission of duty, was sustainable.

Analysis: The assessee's request for destruction of expired medicines had already been considered and remission of duty under Rule 49(1) of the Central Excise Rules, 1944 had been accepted earlier. On remand, the authority was required only to pass a speaking order after hearing the assessee and could not reopen the settled question of eligibility for remission. The impugned demand rested on the assumption that the Modvat credit had to be reversed, but the authority had also accepted the assessee's entitlement to the credit on the inputs used in the final product. In these circumstances, there was no basis to sustain the duty demand confirmed under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A(1) of the Central Excise Act, 1944.

Conclusion: The confirmation of demand was unsustainable and was set aside in favour of the assessee.

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