Modvat credit reversal and duty rate: exemption to the original manufacturer did not bar clearance of brake linings.

On reversal of Modvat credit, brake linings could be cleared without attracting the higher duty rate because the deeming fiction under Rule 57-F applied only for determining the rate of duty. The fact that the exemption under Notification No. 59/90-C.E. had already been extended to the original manufacturers did not, by itself, defeat clearance of the goods by the assessee after reversal of credit. As no material was shown to disturb the appellate authority's view, the demand for higher duty was not sustained and the order in favour of the assessee was upheld.

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Issues: Whether, on reversal of Modvat credit, the assessee could clear the brake linings without being subjected to the higher duty rate on the basis that the exemption benefit under Notification No. 59/90-C.E. had already been extended to the original manufacturers.

Analysis: The goods were received on payment of duty and were removed only after reversal of Modvat credit. The deeming fiction under Rule 57-F operated only for the limited purpose of the rate of duty. The alleged mistake in extending the exemption notification to the manufacturers of brake linings did not prevent the assessee from clearing the goods on reversal of credit. No material was shown to disturb the appellate authority's view.

Conclusion: The assessee was entitled to clear the goods on reversal of Modvat credit, and the Revenue's demand for higher duty was not sustained.

Final Conclusion: The appellate order in favour of the assessee was upheld and the Revenue's challenge failed.

Ratio Decidendi: The deeming fiction under Rule 57-F is confined to the rate of duty, and an exemption already extended to the original manufacturer does not, by itself, defeat clearance of inputs on reversal of Modvat credit.

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