Modvat credit on inputs cleared as such: duty is limited to the duty already suffered, with remand for payment verification.

Under Rule 57F(1)(ii), the duty payable on inputs cleared as such was governed by the duty already suffered by the inputs at receipt, not by any reassessed or enhanced duty at the user's end. The later amendment was treated as non-clarificatory and not retrospective, so the pre-amendment position continued to apply to such clearances. On that basis, a demand for higher duty could not stand merely because the goods were removed as such if duty equal to the Modvat credit taken had already been paid. The matter was remitted for verification of actual payment and for fresh adjudication only on any balance liability.

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Issues: Whether, for removal of inputs as such under Rule 57F(1)(ii), the duty payable prior to the 1-3-1992 amendment was to be determined with reference to the duty suffered at the time of receipt of the inputs and whether, on the facts, the demand and penalty could survive without verification of payment of duty equal to the Modvat credit taken.

Analysis: The Larger Bench view was followed that the expression "appropriate duty of excise" in Rule 57F(1)(ii) refers to the duty already suffered by the inputs at the first instance and not to a reassessed or enhanced duty at the user's end. The pre-amendment position governed clearances of inputs as such, and the later amendment was not treated as clarificatory so as to operate retrospectively. On that basis, where duty equal to the Modvat credit taken had already been paid at the time of removal, no higher duty burden could be fastened merely because the goods were cleared as such.

Conclusion: The assessee's plea was accepted on the substantive duty issue, and the order demanding higher duty was held prima facie unsustainable. The matter was, however, sent back for verification of whether duty equal to the Modvat credit taken had in fact been paid, with consequential fresh adjudication only if anything remained due.

Final Conclusion: The decision substantially favoured the assessee on the legal issue governing valuation and duty on clearance of inputs, but final liability and penalty were left to be determined after verification on remand.

Ratio Decidendi: Under Rule 57F(1)(ii), the duty payable on inputs cleared as such is governed by the duty already suffered by the inputs and cannot be enhanced by treating the clearance as attracting a higher effective rate at the user's end.

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