Larger Bench reference power and duty on removed inputs: credit-based duty applies under Rule 57F(1)(ii), not clearance-rate duty.

The Tribunal framework was interpreted as allowing the President to constitute a Larger Bench and refer a matter even where an earlier Larger Bench view existed, because a Bench may doubt the correctness of an earlier decision and seek reconsideration. Under Rule 57F(1)(ii), duty on inputs removed as such was held payable at the rate originally taken as credit, not the rate prevailing on the date of removal, because the provision is aimed at restoring the duty incidence already availed through credit. The earlier Larger Bench view in American Auto Services was followed as correctly stating the position.

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Issues: (i) Whether the President had competence to constitute a Larger Bench and refer the matter notwithstanding an earlier larger-bench decision; (ii) whether, under Rule 57F(1)(ii), duty on inputs removed as such was payable at the rate prevailing on the date of removal or at the rate at which credit had originally been taken.

Issue (i): Whether the President had competence to constitute a Larger Bench and refer the matter notwithstanding an earlier larger-bench decision.

Analysis: The reference power under the Tribunal framework was held to be wide enough to enable a matter to be referred where a Bench found itself unable to agree with an earlier decision. The earlier decision in Paras Laminates was treated as recognising that a Bench may doubt the correctness of an earlier view and that the President may constitutionally refer the matter for decision by a Larger Bench. The fact that the earlier view had been rendered by a Bench of larger strength did not deprive the President of that power.

Conclusion: The reference and the constitution of the Larger Bench were held to be valid.

Issue (ii): Whether, under Rule 57F(1)(ii), duty on inputs removed as such was payable at the rate prevailing on the date of removal or at the rate at which credit had originally been taken.

Analysis: Rule 57F(1)(ii) permits removal of inputs after credit has been taken, and the proviso ensures that duty on home consumption cannot be less than the credit allowed. The legal fiction treating the recipient as a manufacturer was understood as a mechanism to restore the original position by debiting the duty incidence earlier availed as credit. The earlier larger-bench view in American Auto Services was followed as correctly explaining that the provision requires payment back of the duty suffered at the first instance, not the higher rate prevailing on the date of clearance.

Conclusion: The applicable duty was held to be the rate at which credit had originally been taken, not the rate prevailing on the date of clearance.

Final Conclusion: The Larger Bench upheld the earlier larger-bench interpretation and confirmed that removal of inputs under Rule 57F(1)(ii) attracted duty corresponding to the original credit taken, while also affirming the validity of the reference to the Larger Bench.

Ratio Decidendi: Where a rule permits removal of credit-availing inputs as such, the duty payable on such removal is confined to restoring the credit already taken, and a reference to a Larger Bench is competent even if an earlier contrary view was expressed by another Bench.

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