Rule 57CC reversal for captive use must be computed on intermediate I.C. Engines, not on downstream exempted pumps.

For goods captively consumed in the manufacture of exempted final products, the Rule 57CC reversal was to be computed on the value of the intermediate I.C. Engines, not on the value of the downstream P.D. Pumps. The Tribunal treated the I.C. Engine as a final product in its own right because it was also cleared on payment of duty in some cases, and held that when such engines were removed without duty for captive use, the statutory reversal had to follow the engine value. The exempted pumps were not the relevant valuation basis for the reversal.

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Issues: Whether, for goods captively consumed in the manufacture of exempted final products, the amount under Rule 57CC was to be reversed on the value of the intermediate I.C. Engines or on the value of the P.D. Pumps into which those engines were fitted.

Analysis: The respondents manufactured I.C. Engines and P.D. Pumps, cleared the engines on payment of duty in some cases, and used part of the engines captively in the manufacture of exempted pumps. The Tribunal held that the I.C. Engine was itself a final product, since it was also cleared on payment of duty, and that when such engines were removed without payment of duty for captive consumption, the reversal under Rule 57CC had to be computed on the value of the engines. The value of the downstream exempted pumps was not the relevant basis for the statutory reversal.

Conclusion: The reversal was correctly made on the value of the I.C. Engines, not on the value of the P.D. Pumps; the revenue's challenge failed.

Final Conclusion: The appeals were rejected because the assessee had correctly reversed the amount with reference to the captively consumed engines, and no further duty reversal on the value of the exempted pumps was warranted.

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