K. Sankararaman, Member (T)

1. The appeal before us has been filed by Collector of Central Excise, Bhubaneswar against the Order-in-Appeal No. 89/BBSR/88, dated 24-8-1988 passed by the Collector of Central Excise (Appeals), Calcutta whereby he allowed the appeal preferred to him by SAIL, Rourkela Steel Plant, against the Order-in-Original dated 14-10-1987 passed by the Assistant Collector of Central Excise, Rourkela Division. By his said order the Assistant Collector had confirmed a demand for Rs. 2,18,627.76 under Rule 571 and imposed a penalty of Rs. 5000/- on the applicants before him (SAIL) who are the respondents in the present proceedings.

2. Modvat credit for the amount of Rs. 2,18,627.76 had been disallowed by the Assistant Collector on the ground that the said claim which was on account of payment of duty on escalation of value of the inputs in question, was not accompanied by any document prescribed under Rule 57G(2). The Collector (Appeals) had held in his order that if duty over and above what was paid at the time of clearance on the strength of Gate Passes was paid by the consignor factory for any reason, there is no question of any Gate Pass being issued in such cases. He set aside the order of the Assistant Collector and allowed the appeal without prejudice to the Assistant Collector's right to have the claim of the appellants (SAIL) about the payment of additional duty verified if considered necessary.

3. In the appeal before us challenging the orders of the Collector (Appeals) it has been contended that the Collector (Appeals) erred in holding that SAIL are entitled to the Modvat credit held admissible by him. The provisions for adjustment of credit taken are contained in Rule 57E and prior to its amendment on 15-4-1987 the said Rule did not cover the case for Modvat arising from recovery of extra duty. Duty has been correctly demanded under Rule 57L and penalty has rightly been imposed on them for deliberately taking wrong credit for which they were not entitled. Setting aside of the Order-in-Appeal passed by the Collector (Appeals) was prayed for.

4. When the appeal was heard Shri M.N. Biswas, learned SDR arguing for the appellant Collector submitted that prior to its amendment w.e.f. 15-4-1987, Rule 57E of the Central Excise Rules, 1944 did not cover a situation of this type where duty was recovered subsequent to the clearance of the goods. Initially, the Rule 57E covered only case where Modvat has to be adjusted downward. On account of payment of Refund from 1-3-1987 upward revision of Modvat was permissible only in the type of cases specifically covered in the amendment introduced from that date. Only from 15-4-1987 could subsequent recoveries of duty for any reason would entitle the user to increase of Modvat Credit. Such a benefit would not be available in the present case, he contended. He pleaded that the appeal may be allowed.

5. The arguments were contested by Shri N. Mookherjee, learned Advocate for the respondents. He submitted that the Collector has correctly allowed their appeal before him and they were rightly entitled to the Modvat credit in respect of the duty payments relating to escalation of value. He opposed the appeal of the Collector.

6. We have considered the submissions of both sides. We agree with the Order of the Collector (Appeals). Modvat credit is as per the provisions of Rule 57A as per which the said credit is in respect of duty paid on the inputs. The said Rule does not limit the credit to duty paid at the time of original clearance and exclude the duty paid subsequently. No doubt, for the payment of duty made at the time of clearance of the goods by the manufacturer there will be evidence of payment of duty by way of Gate Passes. Though Gate Passes may not be there for duty paid subsequently the respondents in this case are reported to have produced evidence of such payment of duty. Whatever duty was paid subsequently does not become anything other than duty because of the tim