Modvat input duty is charged at the rate prevailing on removal, unless the credit-based proviso is triggered.

Inputs cleared from a factory for home consumption under Modvat are chargeable to duty at the rate prevailing on the date of removal, because Rule 57F(1)(ii) requires such inputs to be treated as if manufactured in the factory. The proviso limiting duty so that it is not less than the credit taken under Rule 57A applies only when the duty otherwise payable is below the credit already availed. Where the duty at removal exceeds the deemed credit, the proviso has no application and the higher rate is payable.

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Issues: Whether inputs removed from the factory for home consumption under the Modvat scheme were liable to duty at the rate prevailing on the date of removal or at the lower rate at which deemed credit had originally been taken.

Analysis: Rule 57F(1)(ii) of the Central Excise Rules, 1944 required inputs removed from the factory to be cleared on payment of appropriate duty of excise as if such inputs had been manufactured in the factory. The duty therefore had to be determined with reference to the rate prevailing on the date of removal. The proviso to the rule, which prevented the duty from being less than the credit taken under Rule 57A, operated only where the duty otherwise payable was below the amount of credit already availed. As the rate of duty on the date of removal was higher than the deemed credit taken, the proviso had no application.

Conclusion: The higher rate of duty prevailing on the date of removal was payable, and the demand confirmed by the lower authorities was correct.

Final Conclusion: The appeal failed and the order demanding duty at the higher rate was sustained.

Ratio Decidendi: Inputs cleared for home consumption under Rule 57F(1)(ii) are chargeable to duty at the rate in force on the date of removal, unless the proviso is attracted because the duty so computed falls below the credit already taken.

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