Cenvat credit restoration after cash discharge of duty liability requires no refund claim where the earlier debit stands cancelled.

Where Cenvat credit validly earned on additional excise duty was later used for payment of basic excise duty and the same liability was subsequently discharged in cash through PLA under the changed statutory scheme, the earlier debit was treated as cancelled. The equivalent credit was therefore required to be restored in the Cenvat account, and a separate refund claim was not necessary. The objection that the re-credit was impermissible as suo motu credit was rejected because the matter concerned restoration of credit after cash payment of the same duty liability, not refund of excess duty.

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Issues: Whether credit of Additional Excise Duty under Goods of Special Importance, once used for payment of Basic Excise Duty and later made good through payment from PLA pursuant to the statutory changes, could be restored in the Cenvat account without filing a refund claim.

Analysis: The credit had been legitimately taken on duty-paid inputs and was later permitted to be used for payment of Basic Excise Duty under the amended Cenvat scheme. Subsequent legislative changes restricted the use of such credit, and the assessee discharged the corresponding liability in cash through PLA in instalments with interest. The department's objection that the re-credit was impermissible as suo motu credit and that a refund claim was required was rejected, because the original debit towards duty was treated as ineffective once the liability was made good in cash. The earlier use of credit was therefore treated as cancelled, and restoration of an equivalent amount was held to be the correct consequence. The distinction drawn in the Larger Bench decision concerning excess duty paid did not apply, since the present matter concerned restoration of credit after cash discharge of the same liability, not refund of excess duty.

Conclusion: The assessee was entitled to restoration of the equivalent credit, and no refund claim was required for such re-credit.

Ratio Decidendi: Where credit validly earned is later used for duty payment and the same duty liability is subsequently discharged in cash under the governing statutory scheme, the earlier credit debit is treated as cancelled and equivalent credit must be restored without insisting on a refund claim.

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