V.P. Gulati, Member (T)

1. This appeal is against the order of Collector of Central Excise (Appeals), Madras. Brief facts are that the appellants have taken MODVAT Credit in respect of some of their inputs and later removed the same to one of their other Units by reversing the credit already taken in respect of the same. The Revenue however demanded duty in terms of Rule 57F(1) at the rate applicable on the date of clearance of the same from the appellants' unit to the other Unit. The appellants have also removed some of their finished product in which inputs had been used, as samples which after being subjected to test were destroyed and the authorities demanded duty from the appellants in respect of the equivalent credit of the inputs contained in the samples, invoking the provisions of Rule 57C.

2. Shri C. Chidambaram, the learned Consultant for the appellants pleaded that in regard to the first point, they had merely removed the goods to their other Unit in terms of Rule 57F(1) and what the Revenue was expected to do was to reverse the MODVAT Credit.

3. Shri P. Sundararaju, the learned SDR adopted the reasoning of the lower authority.

4. Rule 57F(1) reads as under :

"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 for which such inputs have been brought into the factory; or

(ii) 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 excisable shall in no case be less than the amount of credit that has been allowed in respect of such inputs under Rule 57A."

5. It is seen that the inputs brought into the factory can be used in the manufacture of final product as inputs in terms of Rule 57F(1) and in case these are removed from the factory for home consumption etc. the removal has to be treated as if these goods which are being removed are manufacture of the said factory. By this deeming provision, therefore, the goods which have been removed from the factory have become the manufacture of the factory, from which these were removed. Duty, therefore, would be required to be collected in respect of those goods in terms of the provisions of this Rule at the rate that would apply to the goods when actually manufactured or produced in this factory. That would mean the requirement of approval of price list and classification list and also the duty payment with reference to the relevant date for that purpose specified in the Act and the Rules. The assessment has to be based on the date of removal of the goods with reference to the classification as applicable. The duty to be paid could be more than the credit that was taken when the goods were brought into the factory but it cannot be less than the amount of credit that was taken by virtue of the proviso to the Rule as above. In the present case, therefore, the order of the lower authority for demanding differential duty is maintainable in law. In regard to the amount demanded in respect of the inputs used in the samples, it is not denied that the finished products were taken out for testing purpose and such goods can be taken to have been removed for home consumption and Rule 49 would come into play. The appellants have cited the case law reported in MANU/CE/0366/1988 : 1989 (39) ELT 689 in support of their plea. He has pleaded that till the testing was completed the appellants' product could not be considered as marketable and hence the product could not be considered as excisable.

6. We observe that in the facts of the case referred to supra, the Tribunal took note of the fact that in terms of the contract, before the goods are delivered, testing was one of