V.P. Gulati, Member (T)

1. This appeal is against the order of the Collector of Central Excise (Appeals), Madras. Brief facts of the case are that the respondents, who are manufacturers of electrical stampings and laminations out of hot rolled and cold rolled electrical steel or silicon steel sheets etc., availed of the MODVAT credit in respect of the inputs as specified under Rule 57A for their final product based on the Ministry's Order No. B-22/5/86-TRO dated 7-4-86. Under these statutory instructions issued by the Govt. of India the respondents availed of the deemed MODVAT credit in respect of the articles purchased by them from the market and which were not covered by any duty paying documents. These instructions of the Ministry, however, were modified and the respondents inputs with effect from 2-11-1987 became ineligible for the deemed MODVAT credit without the production of the duty paying documents. At the relevant time they had 29,812 Kgs. of the inputs which they had received earlier to 2-11-1987 and in respect of which they had taken the deemed MODVAT credit. The learned original authority after issuing the show cause notice held that this quantum which was lying unutilised though purchased earlier to 2-11-1987 was not eligible for the deemed MODVAT credit in view of the amending instructions. The learned Collector (Appeals) however, on appeal filed by the respondents, held as under :-

"After careful consideration of the appellants' submissions, I am of the view that deemed credit already availed on the inputs received prior to 2-11-1987 cannot be reversed on the ground that such inputs were not utilized and were lying in stock on that date. The order of the lower authority reversing the deemed credit is not correct in law and the same is set aside The appeal is allowed."

It is against the above findings of the learned Collector (Appeals) that the Revenue is in appeal before us. The Collector in his grounds of appeal has urged that in view of the instructions issued on 2-11-1987 the stock of the inputs lying were no longer covered by the deemed MODVAT credit scheme.

2. The learned SDR reiterated the grounds of appeal and pleaded for the setting aside of the order of the learned Collector (Appeals).

3. None appeared for the respondents.

4. We observe that there is no dispute that the respondents at the time they brought in the inputs in question were eligible for the benefit of the MODVAT credit and took and MODVAT credit in terms of the directions issued by the Central Government under second proviso to Rule 57G(2). In the absence of this instruction, in the normal course under Rule 57G(2) a manufacturer who has filed a declaration under sub-rule (1) of Rule 57G and has obtained a dated acknowledgement declaring the inputs and the finished product in respect of which MODVAT credit is required to be taken and utilised can take credit of the duty paid on the inputs received by him, if the same have been received under a cover of gate pass or a ARI, a bill of entry or any other prescribed document evidencing payment of duty. Thus it may be seen the normal requirement of law under Rule 57G(2) for purpose of taking MODVAT credit in respect of eligible inputs is the production of gate pass etc. evidencing payment of duty. By virtue of the proviso to Rule 57G(2) an exception has been created whereby on the satisfaction of the Central Government certain inputs that may be available in the country have been treated to have been deemed to be duty paid and in the event of a manufacturer bringing in these inputs into the factory the same even when not covered by any document showing the payment of Central Excise duty in respect of the same, by virtue of the deeming provision the manufacturer can take the quantum of the credit of duty as may have been directed by the Central Government to be available for the purpose. The respondents at the relevant time when they brought in the inputs were covered by the directions issued by th