Rule 57CC applicability fails where re-rubberising is repair, not manufacture, and no common credit inputs are proved.

Rule 57CC(1) applies only when the statutory conditions are established on facts, including manufacture of both dutiable and exempt products and use of common Modvat credit-availing inputs. Re-rubberising of old rollers was treated as repair or refurnishing, not manufacture, and the assessee had separate procurement for the repair activity without availing Modvat credit on those inputs. As the department did not verify, on any reliable factual basis, that common modvated inputs were used for re-rubberising, the condition for invoking Rule 57CC was not met. The duty demand and penalty were therefore not sustainable.

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Issues: Whether Rule 57CC(1) of the Central Excise Rules applied where the assessee carried on re-rubberising or repair of old rollers separately from the manufacture of dutiable rollers and did not take Modvat credit on inputs used for the repair activity.

Analysis: Re-rubberising was held to be repair or refurnishing and not a manufacturing activity. On the facts, the assessee maintained separate procurement for the repair activity, did not avail Modvat credit on those inputs, and the departmental case did not establish by any factual verification that common Modvat inputs were used for the repair work. In the absence of a finding based on input-output ratio or any other reliable basis showing use of modvated inputs for re-rubberising, the statutory condition for applying Rule 57CC was not satisfied.

Conclusion: Rule 57CC(1) was held inapplicable, and the duty demand and penalty could not be sustained; the decision was in favour of the assessee.

Ratio Decidendi: Rule 57CC applies only where the statutory conditions regarding manufacture of both dutiable and exempt products and use of common credit-availing inputs are established on facts.

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