Rule 57AD demand fails where exempted goods were made from non-cenvatable inputs, leaving no basis for recovery.

The demand of 8% of the sale price of exempted goods under Rule 57AD of the Central Excise Rules could not be sustained once the lower authority found, after remand, that the wheel rims for ADV and harvester were manufactured from non-cenvatable inputs. On that factual basis, the condition for invoking the 8% demand no longer existed, and the demand was set aside. Any refund was stated to remain subject to the principle of unjust enrichment.

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Issues: Whether the demand of 8% of the sale price of exempted goods was sustainable when the exempted goods were found to have been manufactured from non-cenvatable inputs.

Analysis: The finding recorded by the lower authority after compliance with the earlier remand was that the wheel rims for ADV and harvester were manufactured from non-cenvatable stocks of inputs. Once that factual position stood established, the basis for demanding 8% of the sale price of the exempted goods under Rule 57AD of the Central Excise Rules did not survive.

Conclusion: The demand was held to be unsustainable and was set aside, resulting in allowance of the appeal. Refund, if any, was left to be governed by the principle of unjust enrichment.

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