Rule 57CC and intermediate inputs for exempted and dutiable medicaments: Modvat credit sustained

Rule 57CC was discussed in relation to an intermediate product used in manufacturing both branded exempted medicaments and generic dutiable medicaments. The Revenue's view that the assessee was dealing with one product in two conditions, so as to require reversal or payment of the prescribed percentage amount, was not accepted. On the stated facts, the Tribunal treated the intermediate product as connected to different final products with different excise treatment and held that the factual basis for applying Rule 57CC could not be sustained. The assessee's Modvat credit was therefore not disallowed.

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Issues: Whether Rule 57CC applied to the intermediate product used in the manufacture of branded exempted medicaments and generic dutiable medicaments so as to require reversal or payment of the prescribed percentage amount.

Analysis: The disputed intermediate product was found to be used in relation to two different final products, which were treated differently for excise purposes depending on whether they were cleared in branded form in the domestic market or in generic form for export. On that basis, the Revenue's contention that the assessee was dealing with only one product in two conditions was not accepted. The Tribunal held that the factual premise underlying the demand, namely that the case fell outside the ambit of Rule 57CC, could not be sustained.

Conclusion: Rule 57CC was not held applicable on the Revenue's construction, and the assessee's credit was not disallowed.

Final Conclusion: The appeal failed and the assessee's position on Modvat credit was sustained.

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