V.P. Gulati, Member

1. This appeal is filed by the Collector of Central Excise, Bangalore against the order of the Collector of Central Excise (Appeals), Madras. Brief facts are that the Respondents had taken deemed MODVAT Credit in respect of steel rounds, MS Channels, MS Rounds, etc in terms of the direction issued by the Government of India Order No. B/22/5/86 TRU dated 7.4.86. Subsequently, Govt. of India vide order No. 332/88/87 TRU dated 2.11.87 have withdrawn the deemed MODVAT Credit in respect of these materials. On that day the Respondents had some of the inputs lying in stock in respect of which they had earlier taken MODVAT Credit. Proceedings were drawn for the reversal of the MODVAT Credit taken in respect of the inputs lying in stock. The learned original authority, however, held that the credit already taken by the Respondents was not required to be reversed. The Collector of Central Excise, Bangalore filed application before the Collector (Appeals) under Section 35E(4) against this order of the Assistant Collector. The Collector (Appeals) has however held that Assistant Collector's order is maintainable in law. The Revenue is in appeal against this order of the Collector (Appeals). The Revenue in the grounds of appeal has urged as under:

Further, the order-in-Appeal failed to appreciate the fact that inputs in respect of which deemed credits taken were lying in stock in the respondents factory without being utilized in the intended final product, as on date of its withdrawal from the purview of deemed credits, would automatically be rendered themselves in-eligible for deemed credits and the credits so taken and utilized earlier are liable to reversed/recovered.

2. Shri P. Sundararaju, the learned SDR for the Revenue has reiterated the grounds of appeal and pleaded that inasmuch as on 02.11.87 the deemed credit was withdrawn the inputs lying in stock could not be treated as being eligible for the deemed MODVAT Credit.

3. The learned Counsel for the Respondents has pleaded that the Central Board of Excise & Customs had occasion to examine the matter and have issued instructions and these instructions have been incorporated in the Trade Notice issued by the Collectorate of Central Excise, Cochin vide No. 177/89 dated 19.9.89 (73-Gen). The relevant portion of the Trade notice is reproduced below:

The matter has been examined, Prior to 29.8.86, deemed credit was available on steel scrap without producing duty-paying documents. However, aforesaid facility has been withdrawn w.e.f. 29.8.86. Since scrap as well as final products remain notified under Modvat Scheme, prior to and after 29.8.86, deemed credit allowed under previous order dated 7.4.86 lying in balance on 28.8.86 can be permitted to be availed for payment of duty on final products.

In this context he also referred to the decision of the Tribunal in the context of Rule 56A in the case of Wipro Information Technology - reported in 1988 (11) ETR 571. He has pleaded that in view of above, it has to be held that the Collector (Appeals)'s order is maintainable in law.

4. We observe that this Bench of the Tribunal in the case of CCE, Bangalore v. Sundar Engineering Industries in Appeal No. E/4/90 decided on 5.12.90 [1991] 33 ECC 59 had occasion to examine the matter in detail and has held as under:

The question, therefore, arises for consideration is that once a particular quantum of goods has been held to be duty paid in the hands of the manufacturer can its character be changed subsequently by issue of another amending direction modifying earlier directions issued under proviso to Rule 57G(2). In our view, the answer to this is 'No'. We observe that the moment the goods under the MODVAT Scheme are brought into the factory, where the manufacturer is eligible to take MODVAT credit, the manufacturer while he takes the MODVAT credit gets bound down by the rigour of the other provisions under the MODVAT rules. It is seen that in terms of Rule 57F the inputs on which the