MODVAT credit cannot be re-availed suo motu after wrongful reversal on inputs used for exempted goods.

An assessee who had wrongly taken MODVAT credit on inputs used in the manufacture of exempted goods could not restore that credit by a unilateral suo motu entry after reversal, even if the reversal was said to be under protest. The Central Excise Act, 1944 and the MODVAT Scheme contained no provision permitting re-availment of the same credit in such circumstances. The prior wrongful availment was merely corrected by reversal, and that correction did not create any legal entitlement to take the credit again. The impugned order was sustained and the appeal failed.

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Issues: Whether the appellant was entitled to restore and take suo motu MODVAT credit after having reversed wrongly availed credit on inputs used in the manufacture of exempted goods.

Analysis: The appellant had admittedly availed MODVAT credit on inputs used in the manufacture of MS rounds exempted under Notification No. 202/88. The reversal of the wrongly taken credit did not create any legal right to re-avail the same amount merely because the reversal was described as being under protest. There was no provision under the Central Excise Act, 1944 or under the MODVAT Scheme permitting an assessee to take suo motu credit in such circumstances. The prior wrong availment having been corrected, the later unilateral restoration of credit was unsupported by law.

Conclusion: The appellant was not entitled to take suo motu credit and the impugned order was sustainable; the appeal failed.

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