Modvat credit after Rule 57G declaration was upheld, with remand for RG 23A adjustment and refund of the stay deposit.

Modvat credit taken after filing the Rule 57G declaration was treated as admissible, while the dispute remained confined to credit linked to inputs received before the declaration. The admissible RG 23A balance could be verified and, if appropriate, used to offset the disputed amount, especially where part of that amount had already been recovered in the same manner. The matter was remanded for fresh verification of the available balance and consequential adjustment, with refund of the cash deposit directed if such debit was effected. Section 11B(2) was held not to bar the refund because the amount was being adjusted through the RG 23A account rather than claimed as ordinary duty refund.

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Issues: Whether Modvat credit taken after the filing of the declaration under Rule 57G could be sustained, whether credit relating to inputs received before the declaration could be recovered from the assessee's RG 23A balance, and whether the matter required remand for verification of the admissible balance and consequent refund of the cash deposit.

Analysis: The declaration requirement under Rule 57G was treated as satisfied for credits taken after filing of the declaration, and such credit was accepted as legitimate. The dispute related only to the credit allegedly taken in respect of inputs received before the declaration. The available RG 23A balance, consisting of admissible credit earned after the declaration, could be used to make good the disputed amount if verification showed that the balance was not itself the disputed credit. Since the Assistant Collector had already recovered part of the disputed amount in the same manner, the balance was directed to be dealt with similarly. The cash amount deposited for stay was linked to the disputed credit and was ordered to be refunded if the debit from the admissible balance was effected. The refund was held not to be barred by Section 11B(2) because the amount was being adjusted against the RG 23A account rather than treated as a refundable duty claim in the ordinary sense.

Conclusion: The credit taken after filing the declaration was upheld, the balance dispute was sent back for fresh verification and adjustment from the admissible RG 23A credit, and the assessee was entitled to refund of the cash deposit if such adjustment was made.

Final Conclusion: The appeal resulted in relief to the assessee by ordering remand for verification of the RG 23A balance and permitting adjustment of the disputed amount from admissible credit, with consequential refund of the cash deposit.

Ratio Decidendi: Modvat credit taken after filing the prescribed declaration is admissible, and where disputed credit can be adjusted against an assessee's separate admissible credit balance, the matter may be remanded for verification and adjustment without attracting the refund bar in Section 11B(2).

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