1993 (7) TMI 195

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....summed up as below : The applicants were availing Modvat credit in respect of certain inputs. As per the declaration filed by them for availment of this benefit, they have to utilise these inputs in the manufacture of the final products specified in the declaration. However, they sought to remove certain inputs brought in their factory under the Modvat scheme, by clearing them as such for home consumption. Such exceptional cases are also covered by the provisions of Rule 57F(1)(ii) of the C.E. Rules. The relevant extracts of sub-rule (1) of Rule 57F are reproduced below :- "The inputs in respect of which a credit of duty has been allowed under Rule 57A may - (i) be used in, or in relation to, the manufacture of final products ....

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....ication is before us. 4. The only question sought for reference is the following : "Whether under Rule 57F(1)(ii) of the Central Excise Rules, 1944, it is permissible to demand reversal of Modvat credit at the rate of duty prevailing on the date of removal of inputs not manufactured by the Assessee for home consumption, instead of restricting the reversal only to the duty credit actually taken by the Assessee." 5. We have heard the arguments from both the sides. 6. Shri Sorabjee mainly pleads that a different view has been taken by the North Regional Bench in the case of CAE India Ltd. v. Collector of Central Excise, Indore, reported in 1992 (61) E.L.T. 726 (Tribunal) = 1992 (40) ECR 343. Since this is a point of law, on wh....

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....f the inputs as such for home consumption with the specific permission of the Collector. This rule also specifically introduces a deeming fiction to treat such inputs, as if they have been manufactured in the factory receiving inputs. In view of this deeming fiction, all the provisions of the Central Excise Act and the Rules applicable to the manufacturer would stand attracted and hence it is inescapable to conclude that the duty has to be paid at the rate prevalent on the date of clearance of inputs from the factory. This deeming fiction, in our view, might have been inserted, having regard to the scheme of Modvat, to discourage the stockpiling of inputs and clearing them, by debiting the actual credit, when the value of inputs or the rate....

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....puts are manufactured by themselves, there is normally no need for them to resort to bringing such inputs from outside and avail the Modvat credit in respect of the duty paid on such inputs. Modvat scheme clearly envisages receipt of duty paid inputs, in respect of which credit can be taken. If it is a case of manufacture of inputs by the same manufacturer of the final product, the question of taking Modvat credit would not normally arise, because he would be entitled to the benefit of exemption from payment of duty on such inputs in terms of Notification No. 217/86 dated 2-4-1986. Be that as it may, we may not be able to read into the rule that the deeming provision is applicable only in the case of an assessee, who also manufactures the s....