Per S.S. Sekhon :

The Appellants are engaged in the manufacture of iron and steel products falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985 and had been exporting the products manufactured by them in terms of the Value Based Advance Licence (VBAL) and Quantity Based Advance Licence (QBAL) issued to them and by availing exemption from payment of Customs Duty on the inputs imported by them under the relevant Customs Notification. They had been taking Modvat Credit of the duty paid on inputs, used in the manufacture.

2. In an around December 1996 and January 1997, the Department entertained the view that under VBAL, the exporter should not at all have taken the input credit on any of the inputs used in the export product. The Department of Revenue issued a Public Notice on 3.1.97 notifying on 'amnesty scheme' under which the exporters operating under VBAL were given an opportunity to reverse the Modvat credit availed by them on the inputs used in exported products along with interest at 20% on or before 31.1.97. To avail the benefit of the 'amnesty scheme', they reversed the Modvat credit along with interest not only against the imports made under VBAL, but also against QBAL issued during the period 1.4.92 to 31.3.95. The Appellants also requested the Assistant Commissioner to verify the amounts reversed and to issue a certificate as to the correctness of the same.

3. On a verification of the such reversals made, the appellants found, that they had reversed amount of Rs. 25,94,067/- in excess. They vide their letter dated 20.3.97 requested the Assistant Commissioner to verify the calculations and also sought refunds of the said excess reversal. The Assistant Commissioner vide his letters dated 26.3.97 in respect of VBAL and QBAL schemes, confirmed the correctness of the calculation made by the appellants.

4. As the appellants had reversed amounts is excess of the actuals and there was no intimation from the department regarding the requests made for the re-credit of these excess amounts, they vide their letter dated 17.6.97, informed the Assistant Commissioner that they were taking credit of the excess reversal amounts made by them in their RG 23A Part II.

5. A show cause notice dated 29.10.97 was issued demanding the Appellants to reverse the credit taken back by the Appellants, on the ground that they had not taken permission from the Department and that there was no provision to take credit of that amount without following the procedure laid down in Section 11B read with Rule 173S. The Deputy Commissioner passed the order-in-original and directed the Appellants to reverse the credit taken. On appeal the Commissioner (Appeals), Hyderabad, has upheld the order of the Deputy Commissioner. Hence this appeal.

6. We have heard both sides and find:-

a) It is not in dispute that the Appellants had reversed credit in excess of what was required under the 'amnesty scheme'. It is also a fact that the Appellants did inform the Assistant Commissioner before taking the credit of the excess amounts originally reversal. The Appellants have therefore only, restored the credit of duty available to them in accordance with the law. They have made arithmetical and accounting corrections required for the maintenance of RG 23A book, as mandated by Rule 226.

b) Section 11B, as urged by the DR before us, has no application to the facts and circumstances of the present case. Since the amount reversed by debit was credit entry in Accounts and not duty and the excess was accepted by the department vide letter dated 26.3.97, admitting the over-pitched calculations, made by the appellants. Reversals of credit by debit entry was in pursuance of the conditions attached to Customs Notification Nos. 203/92-Cus and 204/92-Cus and the amnesty scheme, and had nothing whatsoever to do with payment or discharge of any duty under the Central Excise Act on the finished products. If such entries were not correct, errors and omissions which