Rule 57-CC reversal applies to inputs used for exempt products despite Chapter X procedure compliance under the exemption notification.

Rule 57-CC of the Central Excise Rules, 1944 applied where inputs were used in relation to both duty-paid and exempt final products, and the assessee was therefore required to reverse 8% of the price. Goods supplied to a buyer availing exemption under Notification No. 6/2000 remained within the exemption framework, and compliance with Chapter X procedure under the notification was only a condition for availing that exemption. That procedural safeguard did not convert the transaction into Chapter X remission so as to exclude it from Rule 57-CC. The assessee was liable to reverse credit and was not entitled to refund of the modvat credit reversed.

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Issues: Whether the assessee was liable to reverse 8% of the price under Rule 57-CC of the Central Excise Rules, 1944 when the goods were supplied to a buyer availing exemption under Notification No. 6/2000 and the Chapter X procedure had been followed.

Analysis: Rule 57-CC applies where inputs are used in the manufacture of both duty-paid final products and final products exempt from duty or chargeable to nil rate of duty. The buyer's product was exempt under Notification No. 6/2000, and the requirement of following Chapter X procedure in the notification was only a safeguard for availing the exemption. That procedural requirement did not convert the transaction into one governed by Chapter X remission so as to take it outside Rule 57-CC. Since the assessee's goods were used in relation to the manufacture of an exempt product, the statutory condition for reversal of credit was attracted.

Conclusion: The assessee was liable under Rule 57-CC and was not entitled to refund of the modvat credit reversed; the answer was against the assessee.

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