Prospective effect of Modvat opt-out bars refund of duty paid before the date of withdrawal.

An assessee's withdrawal from the Modvat credit scheme was treated as operating only prospectively from the date of opt-out. Duty paid before 6-5-1986, when the assessee had not yet reverted to SSI exemption under Notification No. 175/86, was held to have been lawfully collected and not refundable. The subsequent change in status could not be given retrospective effect to recover duty already paid. Accordingly, the refund claim for the pre-opt-out period was not maintainable.

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Issues: Whether the assessee, having opted out of the Modvat credit scheme on 6-5-1986 and reverted to SSI exemption under Notification No. 175/86, was entitled to refund of duty paid for the period prior to that date.

Analysis: The right to opt out of the Modvat credit scheme was accepted, but the effect of such opt-out was held to commence only from the date of the option. Duty paid before 6-5-1986 was therefore treated as lawfully collected and not liable to be refunded, since the change in status could not operate retrospectively.

Conclusion: The refund claim for the period prior to 6-5-1986 was not maintainable and the revenue's challenge succeeded.

Ratio Decidendi: An assessee's withdrawal from the Modvat credit scheme operates prospectively from the date of opt-out, and duty paid before that date is not refundable on the basis of the subsequent change in status.

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