Refund on finalisation of provisional assessment cannot be defeated by Modvat lapse or a limitation plea

On finalisation of provisional assessment, excess duty paid had to be adjusted or refunded, and the Revenue could not deny relief by treating the payment as a lapsed Modvat credit. The disputed amount was duty paid under provisional assessment, not a Modvat entry, so the later reversal did not change its character. The limitation objection was held inapplicable on the facts because the same goods had effectively suffered duty twice, making refund appropriate. The refund was therefore correctly allowed, and both the limitation defence and the plea of Modvat lapse failed.

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Issues: Whether the refund claim arising out of finalisation of provisional assessment was barred by limitation and whether the assessee could be denied refund on the ground that the amount had lapsed as Modvat credit.

Analysis: The duty originally paid during provisional assessment was required to be adjusted on finalisation of assessment, and the Revenue ought to have given credit for the excess amount. The amount in dispute was not a mere Modvat credit entry but duty paid under provisional assessment, and the assessee's later reversal and refund claim did not alter the character of the payment. Since the same goods had effectively suffered duty twice, the limitation objection was held to be inapplicable in the circumstances. The plea that the amount had lapsed as Modvat credit was rejected because the payment was not made by way of Modvat credit.

Conclusion: The refund was rightly allowed, and the objections based on limitation and lapse of Modvat credit failed.

Ratio Decidendi: On finalisation of provisional assessment, excess duty paid must be adjusted or refunded, and a payment made as duty under provisional assessment cannot be denied refund on the basis of Modvat lapse or a limitation objection inconsistent with the nature of the claim.

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