Modvat inputs removed as such attracted duty at the receiving factory's applicable rate, not mere credit reversal.

Rule 57F(1) permitted inputs received under Modvat credit to be removed from the factory for home consumption on payment of appropriate duty of excise as if manufactured in the receiving factory, subject to a minimum duty not less than the credit allowed under Rule 57A. The phrase "appropriate duty of excise" was read as the duty payable at the time and place of removal, not merely the amount of credit taken. This was treated as distinct from recovery of wrongly availed credit under Rule 57I. A later amendment confirmed that, before 29-6-1995, duty on such removal was the duty otherwise applicable to the receiving factory on the date of clearance.

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Issues: Whether inputs received under Modvat credit and later removed as such from the factory under Rule 57F(1) were liable to duty at the rate applicable to the receiving manufacturer on the date of removal, and whether mere reversal of the credit taken was sufficient.

Analysis: Rule 57F(1) permitted removal of inputs from the factory for home consumption on payment of appropriate duty of excise as if the inputs had been manufactured in the receiving factory, subject to a minimum duty not less than the credit allowed under Rule 57A. The expression "appropriate duty of excise" was construed to mean the duty payable at the time and place of removal, applying the statutory fiction that the receiver of the inputs was to be treated as the manufacturer. This was distinct from recovery of wrongly availed credit under Rule 57I. The later amendment by Notification No. 28/95-C.E. (N.T.) confirmed that prior to 29-6-1995 the duty payable on such removal was not confined to the amount of credit taken, but was the duty otherwise applicable to the receiving factory on the date of clearance.

Conclusion: The duty payable on removal of the inputs as such was not limited to reversal of Modvat credit and had to be determined at the rate applicable to the receiving manufacturer on the date of removal; the Revenue's view was correct.

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