Modvat credit reversal on inputs used for exempt steam clearances, not 8% payment under Rule 57CC.

Modvat credit relating to DM Water used in manufacturing steam sold to a sister concern was required to be reversed only to the extent attributable to the exempted clearances. The demand could not be computed on the value of the steam sold, and the appellant was not liable to pay 8% of the amount under Rule 57CC of the Central Excise Rules, 1944. The credit reversal was confined to the input used in the exempted output, while the matter was remanded to the original authority for fresh adjudication after giving a reasonable opportunity to adduce further evidence.

---

---

Issues: Whether the appellant was required to reverse Modvat credit attributable to DM Water used in the manufacture of steam sold to its sister concern, and whether it was liable to pay 8% of the value under Rule 57CC of the Central Excise Rules, 1944.

Analysis: The disputed demand was not to be computed on the value of steam sold, but only to the extent of Modvat credit taken on DM Water that went into the manufacture of the steam sold to the sister concern. On the facts recorded, the liability was confined to reversal of credit relatable to the input used for the exempted clearances, and not to payment of 8% of the amount demanded by the Department. The matter was sent back to the original authority for fresh adjudication after giving a reasonable opportunity to adduce further evidence.

Conclusion: The appellant was held liable only to reverse the Modvat credit relatable to DM Water used in the steam sold to the sister concern, and was not liable to pay 8% of the duty amount under Rule 57CC of the Central Excise Rules, 1944.

---