Modvat refund cannot be adjusted for buyers' alleged excess credit; action must lie against the credit takers under Rule 57E.

Rule 57E permits variation of Modvat credit only in the hands of the person who actually took the credit, through adjustment in the credit account or by recovery or refund as applicable. It does not authorise reduction or adjustment of an assessee's refund under Section 11B merely because buyers may have taken excess credit on the duty originally paid. In the absence of a specific legal provision allowing such set-off, the Department must proceed against the persons who availed the credit, and the refund claim could not be curtailed on that ground.

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Issues: Whether, on sanction of refund to the assessee under Section 11B, the refund amount could be reduced or adjusted on the ground that the buyers may have taken excess Modvat credit, by invoking Rule 57E.

Analysis: Rule 57E contemplates variation of the credit in the hands of the person who has taken the credit, by adjustment in the relevant credit account or by cash recovery or refund, as the case may be. The rule does not authorize adjustment of the assessee's refund claim merely because the buyers may have availed credit on the duty originally paid. In the absence of a specific legal provision enabling such adjustment against the refund payable to the assessee, the Department cannot insist that the assessee make good the buyers' alleged excess credit. The proper course is for the Department to take action under Rule 57E against the persons who actually availed the credit.

Conclusion: The refund could not be curtailed or adjusted on account of the buyers' Modvat credit, and the objection based on Rule 57E failed.

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