Exempted excise duty and lapsed Modvat credit: duty collected from buyers after exemption could not be retained.

Where goods had already become exempt from central excise duty, duty collected from buyers after the exemption could not be retained or justified as an adjustment against credit. The balance Modvat credit in RG 23A Part II had earlier been ordered to be expunged and treated as lapsed, and that finding had attained finality because no appeal was filed. As no credit remained available on or after the exemption date, the respondents could not rely on buyer-collected duty to avoid remittance of the amount.

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Issues: Whether the respondent was entitled to retain or adjust duty collected from buyers after the goods became exempt from central excise duty, and whether the balance Modvat credit lying in RG 23A Part II as on the exemption date had already lapsed.

Analysis: The balance credit in RG 23A Part II had been ordered to be expunged and treated as lapsed, and that finding had attained finality as no appeal was filed by the respondents. On that basis, there was no available credit balance on or after the exemption date. The respondents, having collected central excise duty from buyers after the goods were exempted under Notification No. 101/94-C.E., could not claim that the amount was adjusted against existing credit or avoid remitting the amount merely because the duty had been collected from customers.

Conclusion: The respondents were not entitled to retain the duty collected after the exemption and the Revenue's challenge succeeded.

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