Modvat credit reversal under investigation may qualify as payment under protest without strict Rule 233B compliance.

Reversal of Modvat credit during departmental investigation, followed by an immediate protest letter, was treated as an adjustment made under protest rather than an ordinary voluntary payment. On those facts, strict prior compliance with Rule 233B of the Central Excise Rules was held inapplicable, because the debit was made at the department's insistence while records were being completed. The rejection of refund for alleged non-compliance with Rule 233B was set aside, and the matter was remanded to the adjudicating authority to consider refund in accordance with law.

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Issues: Whether reversal of Modvat credit, made during departmental investigation and followed by an immediate protest letter, could be treated as payment under protest without strict compliance with Rule 233B of the Central Excise Rules.

Analysis: The reversal was made while the department was investigating the availment of Modvat credit and the assessee was directed to debit the credit pending completion of records. A protest letter was addressed within two days explaining the circumstances and stating that the debit was under protest. In these facts, the requirement in Rule 233B as to delivery of protest before payment was held inapplicable, because the reversal was not treated as an ordinary voluntary payment but as an adjustment made during investigation. The procedural requirements of the rule were therefore not considered mandatory in the peculiar circumstances of the case.

Conclusion: The rejection of refund on the ground of non-compliance with Rule 233B of the Central Excise Rules was set aside, and the matter was sent back to the adjudicating authority to consider refund in accordance with law.

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