Modvat credit wrongly routed through PLA treated as an accounting error; restoration permitted for timely utilisation.

Modvat credit wrongly moved from RG 23 to the PLA was treated as an accounting irregularity, not a disentitling breach, where an earlier appellate direction had already required retransfer so the credit could be utilised while the facility remained available. The assessee was to receive restoration of the amount and be treated as if the transfer had been made in time, because delay was caused by an unnecessary permission request and delayed departmental response. Any balance left unutilised by the relevant cutoff would lapse under the transition provisions.

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Issues: Whether the assessee could be granted the benefit of transfer and utilisation of credit in view of the earlier appellate direction, notwithstanding the mistaken routing of the amount through the PLA and the subsequent lapse of the Modvat notification.

Analysis: The amount originally stood in RG 23 and was wrongly moved to the PLA. The earlier appellate order had already directed retransfer so that the credit could be utilised during the period when the facility was available. The assessee's unnecessary request for permission and the Department's delayed response prevented timely implementation. The defect was treated as an accounting irregularity rather than a disentitling violation. In substance, the assessee remained entitled to have the amount restored and given effect as if the transfer had been made in time, while any balance unutilised as on the relevant cutoff would lapse under the transition provisions.

Conclusion: The assessee was entitled to the benefit of the credit on an equitable and accounting basis, and the Department's appeal failed.

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