Modvat credit on removal of inputs as such is limited to the original credit taken, not the clearance-date duty rate.

On removal of inputs as such under Rule 57F(1)(ii) of the Central Excise Rules, the duty payable is coextensive with the Modvat credit originally taken and is not to be recalculated at the rate prevailing on the date of clearance. The precedent applied treated the Revenue's contrary view as a minority position that had later been disapproved and confirmed by a five-member Larger Bench. On that basis, a demand computed by applying the clearance-date rate was held unsustainable, and the demand was set aside in favour of the assessee.

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Issues: Whether, on removal of input as such under Rule 57F(1)(ii) of the Central Excise Rules, the duty payable is to be computed at the rate applicable on the date of clearance or whether it is limited to the Modvat credit originally availed on such input.

Analysis: The applicable precedent held that, on removal of inputs as such, the debit must be made at the same amount as the credit originally taken. The view relied upon by the Revenue was only a minority view in an earlier larger Bench decision and was subsequently approved by a five-member Larger Bench, which confirmed that the duty liability in such cases is coextensive with the credit taken and not the prevailing rate on clearance.

Conclusion: The demand based on application of the clearance-date rate was unsustainable; the issue was decided in favour of the assessee and the demand was set aside.

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