1995 (6) TMI 33 - AT - Central Excise

Summary

Issues Involved:
1. Rate of duty payable on duty-paid inputs brought into the factory and utilized for Modvat credit.
2. Interpretation of Rule 57F(1)(ii) of Central Excise Rules, 1944.
3. Conflict between the Tribunal's decisions in SAE (India) Ltd. v. CCE and Ponds India Ltd. v. CCE.

Summary:

1. Rate of Duty Payable on Duty-Paid Inputs:
The primary issue was determining the rate of duty required to be paid on duty-paid inputs purchased and brought inside the factory, on which Modvat credit had been utilized, at the time of their removal for home consumption u/r 57F(1)(ii) of Central Excise Rules, 1944.

2. Interpretation of Rule 57F(1)(ii):
The assessee argued that the term "as if such inputs have been manufactured" in Rule 57F(1)(ii) implied that the duty should be the same as initially paid when the goods were brought into the factory, not a fresh rate based on current rates. The original authority disagreed, holding that the effective rate of duty as per Notification No. 60/90 dated 20-3-1990 was required.

3. Conflict Between Tribunal's Decisions:
The South Regional Bench in Ponds India Ltd. v. CCE held that the duty should be based on the rate at the time of removal for home consumption, requiring approval of price and classification lists. Conversely, the North Regional Bench in SAE (India) Ltd. v. CCE held that the duty should be based on the rate at which the original manufacturer paid, not a higher rate at the time of removal by the purchaser.

Judgment:
The Larger Bench, after considering both sides, concluded that the view in SAE (India) Ltd. was correct. It held that the classification and assessment finalized at the original manufacturer's end could not be reopened at the user's end. The term "appropriate duty of excise" should be interpreted as the rate of duty initially paid, not the effective rate at the time of removal for home consumption. Thus, the appeal by the revenue was dismissed.

Separate Judgment:
Member (T) V.P. Gulati dissented, arguing that Rule 57F(1)(ii) intended for the duty to be reassessed at the prevailing rate at the time of clearance from the factory, treating the inputs as if they were manufactured in the factory. He opined that the appeal of the revenue should be allowed, emphasizing the clear legislative intent and the machinery provision for recovery of duty.