ORDER
R. Jayaraman, Member (T)
1. This appeal is directed against the order in appeal No. SDI-466/B.II/91 dated 20-9-1991, rejecting the appellants’ appeal. The appellants received duty paid components as inputs under the modvat scheme for the manufacture of tractors, which are cleared on payment of duty. Some of the components so received are cleared as such without undergoing any process for emergency supplies to various depots all over the country. At the time of removal of these inputs as such, they reverse the modvat credit in respect of the duty paid on these inputs as per the duty amounts evidenced in the Gate passes. Wherever the notional higher credits have been taken in respect of these receipts, they also reversed the higher notional credit so taken. However, the Department objected to the quantum of credit reversed, by pointing out the provisions of Rule 57F(1)(ii) and stated that these inputs are to suffer duty as per the rate and as per the value on the date of clearance, since they are deemed to be the manufacturer of these inputs, in terms of the aforesaid rules. In the adjudication proceedings held by the Asstt. Collector the differential duty on the basis of the rate prevalent and on the basis of the value on the aforesaid inputs was demanded. The matter was taken in appeal before the Collector (Appeals), who rejected the appeal. The present appeal is against the aforesaid order.
2. Shri Pickle, the ld. consultant, on behalf of the appellants, pleaded that on the question of valuation of these inputs, there is another order of the Collector (Appeals) holding that only if the inputs are manufactured by them, they are to give the price list in respect of these inputs. He also submitted that the point to be decided in this appeal is what should be the assessable value and the rate of duty in the case of removal of inputs under Rule 57F(1)(ii) of the Central Excise Rules. The main thrust of his arguments can be summed up as below :
The provisions of Sec. 3 of the Central Excise Act and Rule 7 of the Central Excise Rules make it clear that duty is payable by the manufacturer and the said duty is recoverable only in respect of goods produced by the manufacturer. There is no dispute here that the inputs are not manufactured by the appellants. They are removing the goods as such without any process.
In the case of Hindustan Petroleum – 1986 (26) E.L.T. 578 (Tri.) the Tribunal have held that provisions of the Act always override those of Rules. When Sec. 3 clearly indicates the chargeability of the duty on the goods produced or manufactured, the responsibility of paying duty is on the manufacturer. The receiver of the inputs cannot be charged to duty again. It is also a settled law that duty cannot be charged twice on the same goods. It has also been held by the Tribunal that the inputs continue to retain the duty paid character, notwithstanding the fact proforma credit has been given in respect of the duty paid on such inputs. On these grounds he submitted that provisions of Rule 57F(1)(ii) cannot be interpreted to mean that the Department can demand the duty for an amount more than the amount of duty taken as credit on these inputs, overlooking the other provisions of the Act.
3. Shri Naik, the ld. JDR for the Department submitted that the modvat scheme is a beneficial scheme and it is self-contained scheme. When the benefit of modvat is given, it is intended that the inputs are to be utilised in the manufacture of final product. It is not meant for trading activity or for supply of inputs as such, after retention. If the inputs are stored and subsequently supplied at a higher price, then by deeming fiction under the Rule itself, they are to pay duty on the assessable value charged by the appellants. Likewise, if there is an enactment in the rate of duty when these inputs come into the . market, at the time of removal these have to bear the appropriate rate of duty. The purpose of proviso to the aforesaid rule is to ensure that the duty once given as credit has to be reversed in any case notwithstanding any exemption granted to these inputs, at the time of their removal. He also referred to the decision of the South Regional Bench reported in 1991 (80) ETR 842.
4. At the outset, we are to mention that the Tribunal is a creature of statute and they are to interpret the provisions of Act and Rules as they are and cannot go into vires of the provisions of the Rules. With these limitations, we are to look into the provisions of Rule 57F(1)(ii) which reads as below :
“The inputs in respect of which a credit of duty has been allowed under Rule 57A may be removed, subject to the prior permission of the Collector of Central Excise, from the factory for home consumption or for export on payment of appropriate duty of excise or for export under bond as if such inputs have been manufactured in the said factory. Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such inputs under Rule 57A” (emphasis supplied)
5. From the above, it is clear that if the inputs are removed, as such, for home consumption, what is contemplated is not mere reversal of credit originally taken. The Rule envisages clearance of such inputs on appropriate duty of excise, as if such inputs have been manufactured in that factory. This deeming concept enables the authorities to insist on the formalities required to be complied with, before permitting removal of inputs for home consumption. By this deeming concept, the receiver of the input is put on par with the manufacturer of these inputs. It is a benevolent scheme meant for giving input relief in respect of the duty paid on inputs. In the circumstances, when the Policy makers have deliberately chosen to treat such a situation as manufacture of goods, all the provisions applicable to the manufacturer may have to be followed. Hence, they have to be assessed on the value at which they are cleared and they should also pay duty at the rate prevalent at the time of clearance. The safeguard provided in the proviso is meant for protecting the interest of the revenue, in situations where such inputs happen to be exempted subsequently or the rate of duty has been lowered, in which case the credit originally taken may have to be paid as duty. This is the view, which can possibly flow from a simple and straight reading of the aforesaid Rule.
6. We accept the legal propositions covered by the citations made by the ld. consultant. No one can say that they physically manufacture these inputs, but the statute provides for deeming them to be manufacturer of inputs and hence inputs, if they are cleared as such, are treated on par with clearance of manufactured goods from a factory. Such a deeming concept can always be incorporated in the statute, so long as it is consistent with the scheme of modvat notified. Modvat scheme is a self-contained scheme which was intended to avert cascading effect of input taxation, by providing credit of duty paid on inputs for utilisation towards payment of duty on the final product. It is not meant for stock and sale. The name itself suggests that it is a modified value added tax scheme. Hence, when the inputs which are received for the declared objective of utilisation in the final product by the receiver of input, are to be allowed diversion for home consumption, as such, it can be done only subject to specific provision laid down in Rule 57F(1)(ii). When the rule introduces the deeming concept of treating such inputs in respect of which credit has been taken on par with the goods manufactured in the recipient factory and the recipient of such inputs on par with the manufacturer of inputs, he has to comply with the requirement, if he seeks to remove the inputs without undergoing any process, on payment of duty as per the provisions of the Act and the Rules applicable to a manufacturer. Such a deeming concept, in our view, goes with the concept of modvat scheme and is not inconsistent. Hence we dismiss the appeal.