Rule 57H(3) requires immediate prior exemption availment; accrued credit denied on procedure may still be restored retrospectively.

Rule 57H(3) permitted transfer of credit only where the manufacturer had been availing the relevant exemption immediately before the Rule 57G declaration; a prior, discontinued use of Notification No. 201/79 did not satisfy that condition, so the transfer of credit was not admissible. Credit that had already accrued while the notification was in force, but was denied for a procedural reason and later restored on verification of duty-paid documents, could nevertheless be utilised retrospectively. The restoration was treated as reinstatement of an existing credit, with corresponding release of the equivalent amount in the personal ledger account.

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Issues: (i) Whether transfer of credit from RG 23 Part II to RG 23A Part II was admissible under Rule 57H(3); (ii) Whether credit already earned but denied for a procedural reason could still be restored and utilised after the notification had ceased to operate.

Issue (i): Whether transfer of credit from RG 23 Part II to RG 23A Part II was admissible under Rule 57H(3).

Analysis: Rule 57H(3) applies only where, immediately before filing the declaration under Rule 57G, the manufacturer was availing of an exemption enabling credit on duty paid materials used in manufacture. The respondents had not been availing that benefit immediately before the relevant Rule 57G declaration after 1-3-1987, since there was a break in their availment of the exemption. Their earlier use of Notification No. 201/79 up to 28-2-1986 did not satisfy the statutory condition of immediate prior availment.

Conclusion: The transfer of credit under Rule 57H(3) was not admissible, and the departmental appeal succeeded on this issue.

Issue (ii): Whether credit already earned but denied for a procedural reason could still be restored and utilised after the notification had ceased to operate.

Analysis: The credit in question had already accrued while Notification No. 201/79 was in force, but its utilisation was prevented by departmental action and later restored by the Tribunal on verification of the duty-paying documents. The operative effect of that restoration was not the grant of a fresh credit after rescission, but the reinstatement of an existing credit for the relevant period. Such restored credit could be used retrospectively, and the equivalent amount could be released for utilisation from the personal ledger account.

Conclusion: The respondents were entitled to restoration and retrospective utilisation of the already accrued credit, with corresponding release of the equivalent amount in the personal ledger account.

Final Conclusion: The impugned order was set aside insofar as it granted transfer of credit under Rule 57H(3), but the respondents retained the benefit of restoration and utilisation of the previously accrued credit, making the appeal only partly successful.

Ratio Decidendi: Rule 57H(3) cannot be invoked unless the manufacturer was immediately before the Rule 57G declaration availing the relevant exemption, but credit already accrued under a subsisting notification and denied only due to procedural default may be restored and utilised retrospectively even after the notification is rescinded.

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