1994 (5) TMI 132 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 57F(1)(ii) of Central Excise Rules, 1944 regarding clearance of inputs.
- Application of Modvat credit and appropriate duty payment.
- Effect of Notification No. 4/92-C.E., dated 1-3-1992 on Rule 57F.
- Legal fiction and its limitation in the case of duty payment.

Analysis:
1. The case involved a dispute regarding the clearance of unbleached absorbent kraft paper and codonal by the appellant without paying the appropriate Central Excise duty. The appellant contended that they cleared the goods based on Modvat credit at a restricted rate, while the Revenue argued that the duty should have been paid at the full rate applicable at the time of clearance.

2. The Revenue argued that under Rule 57F(1)(ii), the duty should be paid at the prevailing rate at the time of clearance, not at the rate of Modvat credit availed by the appellant. They relied on a judgment to distinguish the case at hand from a previous ruling, emphasizing the timing of the clearance before the amendment in Rule 57F in 1992.

3. On the other hand, the respondent's counsel contended that Rule 57F allows removal of inputs subject to certain conditions, including prior permission and payment of duty not less than the credit allowed. They cited legal principles emphasizing the limitation of legal fictions and argued that the duty paid should not exceed the credit taken, especially if the inputs were not used in manufacturing the final product.

4. The Tribunal considered the interpretation of Rule 57F and the impact of the 1992 amendment introducing sub-rule (1A). Referring to a previous case, the Tribunal held that the goods should be cleared by paying duty at the prevailing rate during the clearance in November 1989, as demanded in the Show Cause Notice. The Tribunal rejected the argument based on legal fictions, stating that the legal fiction should not extend beyond its legitimate scope.

5. Consequently, the Tribunal set aside the order-in-appeal that had overturned the demand for Central Excise duty and reinstated the order of the Additional Collector. No decision was made regarding the personal penalty as it was not raised by the Revenue during the appeal proceedings.

6. The appeal was disposed of accordingly, with the decision favoring the Revenue's contention on the duty payment issue under Rule 57F(1)(ii) and the application of Modvat credit.