Refund of accumulated Modvat credit cannot be denied on a formal notification condition when the credit was not practically utilisable.

Accumulated deemed Modvat credit under Rule 57F of the Central Excise Rules, 1944 was held refundable where the credit remained unutilised during the relevant export quarter and duty had been paid through PLA. Although refund was denied on the basis of condition 6 of Notification No. 85/87-C.E., the record showed that the credit was not practically available for utilisation before the compounded levy scheme intervened. The formal condition could not defeat refund on these facts, so the denial was unsound and the refund claim was allowed.

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Issues: Whether the assessee was entitled to refund of accumulated deemed Modvat credit under Rule 57F of the Central Excise Rules, 1944 despite the denial based on condition 6 of Notification No. 85/87-C.E. dated 1-3-87.

Analysis: The refund claim related to credit lying in balance during the export quarter. The denial rested on the premise that the assessee could have utilised the credit against clearances, but the record showed that duty had been paid through PLA during the relevant period and that the compounded levy scheme had intervened before the quarter ended. On those facts, the accumulated credit could not be said to have been practically utilizable against the duty payment made, and the insistence on denial of refund was held to be unsound.

Conclusion: The assessee was entitled to refund of the accumulated deemed Modvat credit and the denial of the claim was set aside.

Final Conclusion: The appeal succeeded and the refund claim was allowed.

Ratio Decidendi: Where accumulated credit could not be utilised during the relevant period and duty was paid through PLA, refund cannot be denied merely on a formal reading of the notification condition.

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