Modvat credit on duty-paid inputs limits duty on removal as such to the duty already borne, not a later higher rate.

Duty-paid inputs removed as such from the factory under Rule 57F(1) were not liable to duty at a higher rate merely because the removal occurred later. The provision deems such inputs to be manufactured in the same factory, but the proviso only requires that duty on removal not be less than the credit allowed under Rule 57A. Where the inputs were already duty-paid and credit had been taken, Rule 9A(ii) did not justify enhancement of duty beyond the duty originally borne. The applicable duty was therefore confined to the duty already paid on the inputs, subject to the Modvat credit floor.

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Issues: Whether inputs removed from the factory under Rule 57F(1) of the Central Excise Rules, 1944 were liable to duty at the rate prevalent on the date of removal or at the rate on which credit had originally been taken under Rule 57A.

Analysis: Rule 57F(1)(ii) permits removal of duty-paid inputs for home consumption on payment of appropriate duty of excise, treating such inputs as if manufactured in the same factory. The proviso ensures that the duty paid cannot be less than the credit allowed under Rule 57A. The appellants were not manufacturers of the inputs; they had purchased duty-paid inputs on which credit had been taken. In that situation, the fiction of manufacture could not be used to levy a higher rate merely because the date of removal was later. Rule 9A(ii) was also considered, but it did not justify enhancement of duty beyond the duty originally borne by the inputs.

Conclusion: The duty payable on removal of the inputs could not exceed the duty already borne for purposes of Modvat credit, and the demand for the higher rate was unsustainable.

Ratio Decidendi: Where duty-paid inputs covered by Modvat credit are removed as such under Rule 57F(1), the applicable duty cannot be raised to a higher rate merely because the removal occurs later; the levy is governed by the duty already paid on the inputs, subject to the minimum of the credit allowed.

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