Modvat credit and exempt clearances attract 8% liability under Rule 57CC despite inputs without credit.

A manufacturer operating under the Modvat scheme and clearing both dutiable and exempted goods is liable to pay 8% of the value of exempt clearances under Rule 57CC when exempt goods are cleared without duty. The fact that some exempt final products were made from inputs on which credit was not taken does not remove the clearances from the rule's scope, because the decisive factor is the assessee's combined clearance of dutiable and exempt goods under Modvat.

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Issues: Whether a manufacturer availing Modvat credit and clearing both dutiable and exempted goods is liable to pay 8% of the value of exempt clearances under Rule 57CC of the Central Excise Rules when the exempt final product is manufactured out of inputs on which no credit was taken.

Analysis: Rule 57CC applied where a manufacturer, working under the Modvat scheme, cleared dutiable as well as exempted goods. The liability to pay 8% of the value of exempt clearances was attracted to the goods cleared without payment of duty. The fact that some quantity of the exempt final product was manufactured from inputs on which credit had not been availed did not take the clearances outside the rule once the assessee was operating under the Modvat scheme and clearing exempted goods along with dutiable goods.

Conclusion: The assessee was liable to pay 8% of the value of the exempt clearances under Rule 57CC of the Central Excise Rules.

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