Prior permission required for transfer of proforma credit under Modvat rules; unilateral credit availment was treated as a punishable contravention.

Credit lying in the proforma credit account under Rule 57H(3) of the Central Excise Rules, 1944 could be transferred to the Modvat account only with prior permission of the Assistant Collector. The assessee availed and utilised the credit before such permission was granted, and the claim of oral permission was not substantiated. That unilateral availment was treated as a breach of the rule and a punishable contravention, so the departmental objection succeeded and the penalty was upheld.

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Issues: Whether credit lying in the proforma credit account could be transferred and utilised under Rule 57H(3) of the Central Excise Rules, 1944 without prior of the Assistant Collector, and whether such suo motu availment attracted penalty.

Analysis: Rule 57H(3) required permission of the Assistant Collector before unutilised credit as on 1-3-1986 could be transferred from the old account to the Modvat account. The assessee took and utilised the credit before such permission was granted, and did so more than once. The explanation that departmental officers had orally permitted the transfer was not substantiated. On the record, the credit was availed unilaterally and in breach of the rule, justifying the departmental objection and the penalty imposed.

Conclusion: The unauthorised availment and utilisation of credit was a contravention of the Central Excise Rules, 1944, and the penalty was upheld in favour of the Revenue.

Ratio Decidendi: Credit under Rule 57H(3) could be transferred only with prior permission of the Assistant Collector, and suo motu availment before such permission constitutes a punishable contravention.

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