Modvat credit debit can be adjusted against final excise duty liability where it remains part payment of duty.

A debit made in the Modvat credit account under Rule 57CC retains the character of duty payment and may be adjusted against the assessee's final central excise duty liability. Where goods were initially cleared without duty, the later discovery of a higher ad valorem duty liability allowed the earlier debit in RG-23A Part II to be set off against the total duty due. The amount was therefore treated as part payment of duty, and no further sum was payable against the asserted balance demand.

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Issues: Whether the amount debited by the appellant in the Modvat account under Rule 57CC could be adjusted against the subsequently determined central excise duty liability on the final product.

Analysis: The appellant initially cleared the goods without duty and was required to debit 8% of the value in the Modvat account. When it later emerged that duty was payable at 13% ad valorem, the appellant paid the balance after setting off the earlier debit. The disputed debit was made from the RG-23A Part II Modvat account, and its character as a payment from that account was not lost merely because it was made under Rule 57CC. The amount represented a debit in the credit account and was therefore capable of being adjusted against the total duty liability.

Conclusion: The debit of Rs. 5,29,413/- was rightly treated as part payment of duty and had to be adjusted against the total duty liability of Rs. 8,60,295/-. No further amount was payable, and the demand was unsustainable.

Ratio Decidendi: A debit made in the Modvat credit account retains the character of duty payment and may be adjusted against the assessee's final excise duty liability, even if the debit was initially made under Rule 57CC.

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