Rule 57S credit reversal on removal of capital goods limited to credit originally taken, not deemed manufacture duty.

On removal of capital goods on which credit had been taken, Rule 57S(i)(ii) was construed as a deeming provision limited to recovery of the credit attributable to those goods. The fiction of "as if manufactured" could not be extended to levy duty at the rates applicable to a hypothetical manufacture in the factory, because the liability was confined to reversal of the credit originally availed. Following the larger Bench view, the departmental demand for reversal at higher rates and amounts was rejected, and the appeal failed.

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Issues: Whether, on removal of capital goods on which credit had been availed, the amount to be reversed under Rule 57S(i)(ii) was to be computed by treating the goods as if they had been manufactured in the factory and attracting duty at the rates applicable to such deemed manufacture, or only to the extent of the credit originally taken.

Analysis: The expression "as if manufactured" was treated as a deeming provision confined to recovery of the credit attributable to the capital goods. It was held that this fiction could not be extended to levy duty on the capital goods at the time of their removal as though duty had not been exempted or not levied ab initio when they were manufactured. The view taken in the cited larger bench decision was followed, and the fact that the revenue's further challenge had not displaced that view was noted.

Conclusion: The department's demand for reversal of credit at rates and amounts applicable as if the capital goods had been manufactured in the factory was negatived, and the appeal failed.

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