Per Shri V.P. GULATI: This appeal is against the order of the Collector of Central Excise, Bangalore. Under the impugned order, the appellants have been called upon to pay an amount of Rs. 1,64,542/- being the MODVAT Credit taken on the inputs namely Phenol Formaldehyde resin used in the manufacture of commercial plywood which was cleared without payment of duty under Rule 191 B of the Central Excise and Salt Act, 1944. The learned lower authority has relied upon the earlier decision in another case wherein the learned lower authority has held as under:

"I have gone through the appeal. The short point for consideration is whether the appellant is eligible for the benefit of modvat credit on Phenol Formel dehyde Resin used as an input in the manufacture of commercial plywood, cleared to M/s Decorative Laminates (P) Ltd. Mysore. Admittedly, the appellant has cleared the input without payment of duty as per the provisions of Rule 191 BB which was availed by M/s Decorative Laminates. First of all, the appellant cannot take the plea that going by the eligibility under Rule 191 BB, the input was eligible for modvat. Evidently, the appellant himself is not an exporter. Had he been the exporter, the input would have suffered duty and export taken place from his premises and in the event of such exports where the inputs are used for the manufacture of final product, the appellant is eligible for Modvat benefit, or alternatively, cash refund of the duty paid on the input, if it is not possible to get the credit in RG 23 A in the circumstances cited in Rule 57F (3). There is no provision under Modvat Rules to give modvat relief in respect of deemed export, since the appellant himself had not availed Rule 19 IBB and the question of extending concession under this Rule, therefore, does not arise. The basic requirement under Rule 57A read with 57F is that the input and the final product should have suffered duty for claiming the credit of duty paid on such inputs. Having not satisfied the basic requirement of this Rule, the appellant has no case to claim the credit. The plea that he had not availed drawback on the input is besides the issue. Having failed to pay duty on the inputs contained in the intermediate product, namely commercial plywood, the question of claiming Modvat on the inputs so contained in the commercial plywood or preferring refund claims does not arise. Further the final products have also not suffered Central Excise duty. In the circumstances, the order of the lower authority is correct in law."

2. The issue therefore that falls for consideration is whether the MODVAT Credit taken in respect of Phenol Formaldehyde Resin which is attributable to the quantity of Phenol Formaldehyde Resin contained in the commercial plywood manufactured by the appellants and removed without payment of duty under Rule 191B can be recovered from the appellants in terms of Rule 571 read with Rule 57C of the Central Excise and Salt Act, 1944. The learned Collector (Appeals) has relied on the ruling of the Tribunal in the case of India Pharmaceutical Works Vs. Collector of Central Excise reported in 1991 (54) ELT 355 (T).

3. The learned Consultant for the appellants has pleaded that the finished products in which the appellants have used the inputs had been cleared from the appellant's factory without payment of duty under Rule 191B of the Central Excise Rules for the purpose of further manufacture and export. He has pleaded that the person to whom the appellants had supplied the finished product namely the commercial plywood had after further processing exported the same and in as much as the goods which are cleared from the appellant's factory were ultimately exported, the appellants should be given the benefit available to the goods in which the inputs in respect of which MOD VAT credit has been taken are used and which are exported in terms of Rule 57F applicable. He has pleaded under this Rule when the finished products are exported and c