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Issues: Whether reversal of an amount equal to 8% of the price of the intermediate product captively consumed in the manufacture of exempted final products was sufficient compliance to deny the benefit of the exemption notification.
Analysis: The assessee manufactured PD pump sets by assembling PD pumps and IC engines and claimed exemption for the pump sets while clearing the IC engines on duty. The dispute turned on whether common input credit, when partly reversed at the rate of 8% of the price of the intermediate product used in the exempted goods, satisfied the requirement of the applicable Cenvat credit scheme. The Tribunal treated the issue as settled by earlier precedent, which held that payment of an amount equivalent to 8% of the price of the intermediate product going into exempted goods amounted to sufficient compliance. As the Revenue did not dispute the factual reversal of 8% in the present case, the earlier ratio was held applicable.
Conclusion: The reversal made by the assessee was held to be sufficient compliance, and the denial of exemption was unsustainable.
Final Conclusion: The impugned order was set aside and the appeals were allowed in favour of the assessee.
Ratio Decidendi: Where the prescribed percentage of the price of an intermediate product used in exempted final products is reversed, such reversal constitutes sufficient compliance with the Cenvat credit requirements for availing the exemption.
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