Per Shri V.P. Gulati :

These appeals involve common issue and are therefore taken up together for disposal.

2. The issue in the appeals relates to the availability of MODVAT Credit taken in respect of the input namely ISO Butyl Rubber which was used in the manufacture of automobile tubes which was ultimately exported and were taken into reckoning for getting entitlement for duty-free importation of the said material under the DEEC Scheme. The facts as are set out in the impugned order in para 3 are reproduced below"

3. The facts as brought out in the impugned order are that the appellants while operating under VABAL imported ISO Butyl Rubber on payment of Customs duties and have availed of credit of CVD paid. Rule 57A permits such availment. After exports are effected the appellants got duty free Import of Butyl Rubber (IBR) as replenishment. The IBR used in the manufacture of goods exported, is duty paid as is confirmed by the appellants.

3. The learned lower appellate authority after considering the scope of the DEEC Scheme and exemption Notification No. 203/92 dated 19.5.1992 entitling the exporter to duty-free importation under DEEC Scheme has held that the remedy in the matter did not lie by way of denial of MODVAT Credit in respect of the inputs used in the exported goods but elsewhere. His findings in this regard are reproduced below :

7. I examined the rival contention. This is a case when on the advice of the Department the appellant reversed the credit of CVD taken as MODVAT credit. The Assistant Commissioner's contention that the credit so taken should be reversed when goods manufactured out of the duty paid inputs are exported under DEEC scheme is not covered by any authority. It is perhaps for this reason he fails to mention the Rule under which he seeks to reject the refund claim. Department seemed to have asked the appellant to reverse the credit in the present case without any authority of law. Under Rule 57 (I) of C.E. Rules, credit can be recovered if it is wrongly availed of or utilised in an irregular manner. The appellant took credit of duty paid on the inputs that have gone into the manufacture of export goods under DEEC. In so far as C.E. Rules go, no irregularity has been committed by the appellant. The Assistant Commissioner appears to believe that Notfn. 203/92 and the condition laid down therein empowers him to direct a manufacturer to reverse the MODVAT Credit. The appellants having complied with the instructions of the Department preferred refund claims of the amount so reversed pleading that they are not required to reverse the credit. The Assistant Commissioner has rejected the claims stating that the appellants are not entitled to the credit as discussed. The Assistant Commissioner's contention is not correct. It is the Assistant Commissioner of Customs, who originally cleared the inputs duty free under Notfn. 203/92, who should take action to recover the duty not collected if the DEEC exporter has violated any of the provisions of that Notification. The Assistant Commissioner of Central Excise , has no authority to ask the manufacturer to reverse the credit simply because the export is taking place under DEEC. In situation of this (When the exporter avails of input stage credit under 57A while fulfilling export obligation under DEEC) the jurisdictional Assistant Commissioner of Central Excise should inform the Assistant Commissioner of Customs, who has cleared the inputs duty free. Such an intimation can be given through AR 4 or AR 4A. Thereupon the Assistant Commissioner of Customs will either not consider that export as a fulfilment of export obligation or demand duty on the inputs which were cleared duty free under Notfn. 203/92. The appellant manufacturer is not required to reverse the credit under C.E. Rules. In the present case the appellant has reversed the credit but claimed refund of the amount reversed to the extent it represented the CVD paid. He is entitled for the refund.

4. The Rev