Modvat transition liability: cash paid for stock-related credit shortfall was statutory, so no refund could be claimed.

A manufacturer opting for complete duty exemption and reversing Modvat credit was required under Rule 57H to discharge, in cash, any shortfall after adjusting the credit balance for inputs in stock or contained in finished goods on the transition date. The cash payment represented the balance of the statutory liability and was not an excess payment. A refund of that amount was therefore misconceived, and no refund was payable.

---

---

Issues: Whether a manufacturer opting for complete exemption from duty and reversing Modvat credit could claim refund of the balance amount paid in cash towards the credit attributable to inputs lying in stock and in finished goods on the date of opting out of the Modvat scheme.

Analysis: Rule 57H required a manufacturer opting for complete exemption to pay an amount equivalent to the credit allowed in respect of inputs lying in stock or contained in finished goods lying in stock on the date of opting for exemption. After adjusting the credit balance in the RG 23A Part II account, any shortfall had to be discharged in cash. The amount paid in cash was therefore not an excess payment but the balance of the statutory liability arising on transition from Modvat to complete exemption.

Conclusion: The refund claim was misconceived and no refund was payable. The appeal was rejected.

---