Modvat credit reversal on capital goods removal requires only the credit actually availed, not higher notional duty.

On removal of capital goods as such, reversal of the Modvat credit actually availed satisfies the statutory requirement, and no further duty can be demanded merely because the goods would otherwise attract a higher notional rate. The Tribunal noted that the assessee had cleared an imported tank to its own unit after reversing the proportionate credit taken, and treated the credit availed and reversed as substantively the same. It also held that the earlier precedent left the position settled in favour of the assessee, while the Revenue's cited decision was irrelevant. The demand for differential duty was therefore unsustainable.

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Issues: Whether, on removal of capital goods as such, the assessee was required to reverse only the Modvat credit actually availed or to pay duty at the higher rate applicable as if the goods were manufactured by the assessee.

Analysis: The assessee had cleared one imported tank to its own unit after reversing the proportionate Modvat credit originally taken. The Revenue contended that Rule 57S(1)(ii) required duty to be paid as if the capital goods were manufactured by the assessee, resulting in liability at a higher rate than the credit availed. The Tribunal held that the amount of credit availed and the amount reversed were the same in substance, and that the dismissal of the Department's appeal in the earlier precedent left the legal position settled in favour of the assessee. The cited decision relied upon by the Revenue was found to be irrelevant to the present controversy.

Conclusion: The assessee was not liable to reverse more than the Modvat credit actually availed, and the Revenue's demand for differential duty was unsustainable.

Final Conclusion: The appeal failed and the order in favour of the assessee was maintained.

Ratio Decidendi: On removal of capital goods as such, reversal of the Modvat credit actually availed satisfies the statutory requirement; no additional duty can be demanded merely because the goods would otherwise attract a higher notional rate.

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