Reversal of credit under excise notification requires Section 11A proceedings and an actual refund event for recovery.

A demand for reversal of credit under Notification No. 201/79-C.E. was treated as recoverable only through Section 11A of the Central Excises and Salt Act, so limitation applied. The Tribunal's earlier view that erroneous availment or recovery of set-off under the notification falls within Section 11A was followed, and the demand could not be sustained as time-barred. On the notification's appendix, paragraph 3 applied only where duty on inputs was actually varied by refund or recovery from the input manufacturer; because no refund had in fact been granted, that condition was absent. The matter also did not fit paragraph 4 as an independently wrong initial availment.

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Issues: (i) Whether the demand for reversal of credit taken under Notification No. 201/79-C.E. was governed by Section 11A of the Central Excises and Salt Act and was barred by time; (ii) whether the case fell under paragraph 3 or paragraph 4 of the appendix to the notification.

Issue (i): The demand arose from the alleged erroneous availment of credit under the notification. A prior Tribunal decision had already held that claims for recredit or recovery on the ground of erroneous availment of set-off under the notification are governed by Section 11A. Applying that view, the demand could not be sustained under a limitation-free footing merely by invoking paragraph 4 of the appendix.

Conclusion: The demand was governed by Section 11A and was barred by time.

Issue (ii): Paragraph 3 applies where the duty paid on inputs is subsequently varied, resulting in a refund to or recovery of duty from the manufacturer of the inputs, in which event the credit is to be correspondingly adjusted. Paragraph 4 applies where credit was wrongly taken at the outset. On the facts, the department and the assessee had initially treated the inputs as falling under item 68, and the later dispute arose only after reclassification. Since the input manufacturer's refund claim had been rejected and no refund had in fact been granted, the condition precedent for action under paragraph 3 was absent. The case was therefore not one of an independently wrong initial availment attracting paragraph 4.

Conclusion: The matter fell outside paragraph 4 and, in the absence of an actual refund to the input manufacturer, paragraph 3 also could not be invoked to sustain the demand.

Final Conclusion: The appellate order of the Collector (Appeals) was upheld and the departmental appeal failed.

Ratio Decidendi: A demand for reversal of credit under Notification No. 201/79-C.E. must be pursued under Section 11A, and recovery under the provision dealing with subsequent variation in input duty requires an actual refund or recovery event in respect of the input manufacturer; absent that event, the demand cannot be maintained.

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