Proportionate credit reversal applies where continuous manufacture prevents separate accounting for inputs used in non-dutiable clearances.

Common inputs used in a continuous manufacturing process remained subject to Rule 57CC where a small quantity of off-grade coke and crude or spilled tar was cleared without duty, but the reversal could not exceed the credit proportionately attributable to those non-dutiable clearances. Because separate accounts for such inputs were not physically feasible, the demand had to be limited to a reasonable recomputation of relatable credit, and an excessive reversal far beyond the total credit taken was unsustainable. The matter was therefore remanded for fresh calculation after hearing the appellants.

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Issues: Whether inputs used in a continuous manufacturing process, where only a small quantity of off-grade coke and crude/spilled tar is cleared without payment of duty, attract reversal of credit under Rule 57CC when separate accounts cannot be maintained, and whether the reversal should be confined to proportionate credit relatable to such non-dutiable clearances.

Analysis: Credit taken on inputs allowed under Rules 57A and 57B remains subject to the restriction in Rule 57CC, subject to the exceptions in Rule 57D. Since the appellants cleared a small quantity of final goods without payment of duty, the goods were within the scope of Rule 57CC. At the same time, the manufacturing process was continuous and it was not physically feasible to maintain separate accounts for the inputs relatable to the off-grade coke and crude/spilled tar. The rule did not cater to such a situation, and justice required that the reversal be limited to the proportionate credit attributable to the goods cleared without duty. A demand far exceeding the total credit taken could not be sustained on the facts.

Conclusion: The appellants were required to reverse only the proportionate credit relatable to the non-dutiable clearances, and the matter had to be remanded for fresh calculation by a reasonable accounting method after giving hearing to the appellants.

Final Conclusion: The substantive liability under the credit-reversal scheme was upheld in principle, but the quantum was left open for recomputation, resulting in a remand for limited reconsideration.

Ratio Decidendi: Where common inputs are used in a continuous manufacturing process and separate accounts cannot be maintained for a small quantity of exempt or non-dutiable final goods, credit reversal may be confined to the proportionate credit relatable to such clearances, rather than the entire credit or an excessive demand.

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