Per V.K. Agrawal : In this Appeal M/s. Grasim Industries Ltd. are challenging penalty imposed on them by the Commissioner under the impugned Order.

2. Shri A.R. Madhav Rao, learned Advocate, submitted that the Appellant manufacture woollen and cotton and man made fabrics and avail CENVAT credit of duty paid on the inputs including yarn; that they removed yarn to their factories also on payment of duty by reversing the CENVAT credit taken nothing but duty; that the Commissioner has relied upon sub-Rule (1C) which came into effect on 1.3.2001 and provides that when inputs are removed as such the manufacturer shall pay the amount equal to the amount of duty of excise which is leviable on such goods at the rate applicable to such goods on date of such removal and on the value determined for such goods under Section 4 of Central Excise Act and such removal shall be made under the cover of an invoice referred to in Rule 52A; that the Commissioner has interpreted that with effect from 1.3.2001, the amount paid at the time of removal of goods as such is no more duty as inputs were allowed to be removed on payment of duty of excise; that this view is not correct as the relevant provision is Rule 57AB(1B) which provides for the utilization of CENVAT credits towards payment of duty on inputs removed as such. Finally, he mentioned that sufficient amount of credit was available even if the duty was to be paid on daily basis in respect of inputs removed as such.

3. Countering the arguments, Shri D.N. Choudhary, learned Senior Departmental Representative, submitted that on account of change in law with effect from 1.3.2001 the amount payable earlier on such yarn; that the credit was being reversed on fortnightly basis in accordance with the provisions of Rule 49 read with Rule 173G of Central Excise Rules, 1944 and Rule 8 of the Central Excise (2) Rules 2001; that the Commissioner under the impugned Order has imposed the penalty on the ground that the amount to be paid for removal of inputs as such is neither duty of excise nor such payment is in respect of excisable goods produced or manufactured and accordingly the facility of fortnightly payment was not available to the Appellants on making payment under Rule 57AB (1C). The learned Advocate, further, submitted that inputs as such are cleared only on payment of duty. He referred to sub Rule (1B) of Rule 57AB which provides that CENVAT Credit may be utilized for payment of any duty of excise on any final products manufactured by the manufacturer or on payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed or such goods are removed as such. He emphasized that the word used by the Legislature is that "duty on inputs or capital goods" which are cleared as such which goes to show that whatever amount is paid at the time of clearance of inputs as such, it is at the time of clearance on inputs as such was no more a duty but an amount equal to the duty of excise a phrase which is also used in Rule 57CC of the Central Excise Rules and which has been treated other than duty. He finally submitted that for imposition of penalty under Rule 173Q (1)(a) no malafide intention is required as the penalty can be imposed for removal of excisable goods in contravention of any of the provisions of the Rules.

4. We have considered the submissions of both the sides. Sub Rule (1B) of Rule 57AB of the Central Excise Rules at the relevant time provided for the utilization of CENVAT Credit. One of the purpose for which CENVAT Credit can be utilized is for payment of duty or inputs or capital goods themselves if such inputs or capital goods are removed as such. We agree with the learned Advocate that what is being paid by a manufacture at the time of removal of inputs or capital goods as such is duty which is evident from the provisions of Rule 57AB (1B). Sub-Rule (1C) provides the manner for determining the amount of duty payable by the manufactur