Rule 57CC limited to mixed exempt and dutiable clearances; exclusive exempt manufacture defeats 8% demand on sale price.

Rule 57CC(1) of the Central Excise Rules, 1944 applies only where a manufacturer clears both exempted and dutiable final products. Where the assessee manufactures exclusively exempted goods, the rule is not attracted, so an 8% demand on the sale price of clearances to the Indian Navy cannot be sustained. On that basis, the demand, duty confirmation and penalties were treated as unsustainable, and consequential relief followed.

---

---

Issues: Whether Rule 57CC(1) of the Central Excise Rules, 1944 could be applied to demand 8% of the sale price in respect of clearances of batteries made to the Indian Navy under exemption, where the assessee was manufacturing only exempted products and not a mix of exempted and dutiable goods.

Analysis: The clearances to the Indian Navy formed part of the purchase order originally placed on the predecessor concern, and an identical dispute in relation to such supplies had already been decided by the Tribunal. The governing principle applied was that Rule 57CC has application only where the manufacturer clears both exempted and dutiable final products. Where the assessee manufactures only exempted products, the rule is not attracted and the demand based on 8% of sale price cannot survive.

Conclusion: Rule 57CC(1) was not applicable and the demand, duty confirmation, and penalties were unsustainable. The appeal was therefore allowed in favour of the assessee with consequential relief.

Final Conclusion: The impugned order was set aside because the assessee's clearances fell outside the mischief of Rule 57CC, the assessee being engaged only in exempted goods.

Ratio Decidendi: Rule 57CC applies only where a manufacturer clears both exempted and dutiable final products, and not where the manufacturer deals exclusively in exempted products.

---