Reversal of Modvat credit under Rule 57-I (1) Instructions - Regarding - Central Excise - 267/73/87-CX.8

Reversal of Modvat credit under Rule 57-I (1) Instructions - Regarding F. No. 267/73/87-CX.8 Dated 8-9-1987 Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Reversal of Modvat credit under Rule 57-I (1) Instructions - Regarding. I am directed to refer to the provisions contained in Rule 57-I (1) of Central Excise Rules, 1944 under which it has been provided that in case of wrong availment of Modvat credit on inputs, credit so taken may be disallowed by the proper officer by adjustment in credit account or account current and if such adjustment is not possible for any reason, by a cash recovery from the manufacturer. A doubt has been raised whether a Show Cause Notice is required to be issued under Rule 57-I (1) for disallowing the credit wrongly availed of under this provisions. The matter has been examined by the Board. It has been decided that while disallowing the credit under Rule 57-I (1), a letter should be issued to the assessee stating the reasons for denial of Modvat credit and asking them to pay/debit the credit wrongly availed of under Rule 57-I (1) within 7 days. Where the assessee fails to reverse the credit wrongly taken within the stipulated period of 7 days or is unwilling to pay the amount or credit wrongly availed, then only a Show Cause Notice should be issued. Necessary instructions may be issued to the field formations. Please acknowledge the receipt of this letter.