S. Kalyanam, Member (J)

1. This appeal is directed against the order of the Collector of Central Excise (Appeals), Madras dated 31-3-1989 confirming the order of the Asstt. Collector of Central Excise, Cantt. Dn., Bangalore and holding that the appellants are not entitled to take additional credit in a sum of Rs. 1,17,795,28. The short question that arises for consideration in the present appeal is whether in a situation where the supplier of raw material is called upon by the Department to pay more duty and whether the additional duty paid by the supplier on the inputs which in turn were purchased by the appellant, the appellant would be entitled to take credit or vary the credit to his advantage. In other words, if the inputs had suffered a certain sum originally at the hands of the supplier and if the supplier is called upon to make a payment of differential duty later, whether the receiver of the inputs would be entitled to take credit in respect of the differential duty paid by the supplier on the inputs.

2. Shri Balasubramaniam, learned Council for the appellants submitted that Rule 57E of the Central Excise Rules, 1944 originally made provision for adjustment of duty credit in favour of the Revenue and it was amended with effect from 1-3-1987 clarifying that adjustment in duty credit is permissible both for the assessees as well as for the Revenue. The learned counsel contended that this amendment should be construed to be clarificatory in the context of the Modvat Scheme and further urged that Rule 57A, which permits the petitioner to take Modvat credit in respect of the duty suffered by the inputs, does not put any restriction or cast any embargo from taking additional credit, if really the input has subsequently suffered additional duty.

3. Heard Shri P.B. Vedantham, learned D.R.

4. We have carefully considered the submissions made before us. We note that the Bench of the Tribunal in the case of 'Indo National Ltd. v. Collector of C. Ex., Hyderabad', (in E/Appeal No. 381/88) in order dated 15-12-1988 reported in MANU/CC/0050/1988 : 1989 (41) ELT 422 (Tri.) while construing the scope of Rule 57E observed as under :-

"5. We have carefully considered the submissions made before us. Rule 57E as it then stood in the relevant date is as follows.-

" Adjustments in duty credit - If duty paid on any inputs in respect of which credit has been allowed under Rule 57A, is varied subsequently due to any reason resulting in payment of refund to the manufacturer or the importer of the inputs, the credit allowed shall be varied accordingly by adjustment in the credit-account maintained under sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 or sub-rule (1) of Rule 173G or, if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of credit under Rule 57A".

On consideration of the above rule, we are of the view that there should be a variation in the rate of duty payable in respect of the input either by operation of law or by otherwise and in the present case it cannot be disputed that there was no variation in regard to the duty payable for the inputs in question and the same continued to be at 20% right through. Merely because the supplier committed a mistake in not clearing the input by paying 20% duty and paid only 12% duty and subsequently paid the differential duty of 8%, it would not amount to variation of the rate of duty within the meaning of Rule 57E extracted above. Since the authorities below have sought to reverse the credit by application of Rule 57E we hold that 57E in the facts and circumstances of the case has no application and therefore, reversal of credit by invoking Rule 57E is not sustainable in law. In this view of the matter, we set aside the impugned order appealed against and allow the appeal, and remit the issue to the original authority for verification of the fact as to whether the input in question has suffered the correct duty as per law and wheth