Per Shri V.P. Gulati :

The prayer in these applications is for dispensation of pre-deposit of a penalty of Rs. 63 Lakhs. The appellants have been penalised for the reason that they had removed the inputs in respect of which the MODVAT credit had been taken without payment of duty in violation of the requirements of Rule 57F.

2. The learned Consultant for the appellants has pleaded that the appellants are a Government of India Undertaking and they have got the clearance from the Committee of Secretaries constituted in terms of the judgement of the Hon'ble Supreme Court in the case of ONGC, who have allowed the appellants to contest the appeal before the Tribunal after making the payment of the duty as demanded in terms of the impugned order. The learned Consultant has stated that the duty amount of Rs. 62,71,869/- has already been paid under protest and they are now before us for the dispensation of the amount of penalty levied by the learned lower authority. The learned Consultant has pleaded, as it is, the appellants were not required to pay the duty as held payable by the learned lower authority, in as much as duty to be paid in terms of the decision of the Larger Bench in the case of American Auto Service reported in 1996 (81) ELT 71 (Tri)= 1996 (13) RLT 364 (T). He has pleaded in terms of this Larger Bench decision, in the event of an assessee clearing the goods in respect of which earlier MODVAT credit had been taken, the amount of duty payable would be equal to the MODVAT credit which was taken by the appellants. He has referred us to para 11 of this majority decision of the Tribunal which is reproduced below for convenience of reference:

11. With utmost respect, we do not agree with this view. The reason being that the classification and its assessment has already been finalised at the original manufacturer's end and such an act of approval of classification and assessment cannot be reopened at the stage of the user of inputs. Further there is no provision in the Act and Rules for reopening the settled classification and assessment at the purchaser's end. The term "appropriately" cannot be read to mean "effective duty of excise" as prevalent at the time of manufacture and removal of goods, at the first instance by the original manufacturer of the goods. As the Rule 57F (1) (ii) is placing a burden on the user to make the payment of duty, therefore, a legal fiction has been created, to consider the user of the inputs as a manufacturer, only to recover the credit already utilised by him on such inputs. This is a requirement for payment of duty on the inputs removed for home consumption, as at the stage of its removal, the duty which it had suffered, has already been utilised by the user of input. Therefore, in order to undo this act, the duty which the input had suffered earlier, is required to be paid back, even if the duty had been reduced at a level lower than the rate at which duty had been paid by the original manufacturer. The proviso to Rule 57F (1) (ii) makes this aspect clear. Therefore, the Rule directs the user of the input to maintain the level of rate of duty, even if rates of excise duty have come down. This same benefit availed by revenue is also required to be granted to the user of inputs when the rates go up by recovering only the rate of duty utilised by him at the time of taking credit. Therefore "appropriate duty of excise" has to be taken as the rate of duty which he suffered at the first instance and it cannot be read to mean "effective rate of duty" as prevalent at the time of clearance of inputs for home consumption. The view expressed in the SAE India Ltd.'s case is required to be accepted and followed. This view appears to have been the understanding of the department also, as can be seen from the Trade Notices referred to before us.

3. He has pleaded, as it is the appellants have paid in excess of the amount due. He has further urged that so far as the payment of the amount in terms of the Lar