Refund under Rule 57CC denied, but cenvat credit allowed for duty-paid captively consumed molasses used in excisable manufacture

Refund of the 8% amount paid on clearances of exempted final products was not available where molasses were used for both dutiable and exempted manufacture, because the payment under Rule 57CC was not refundable on the admitted facts. By contrast, duty-paid molasses captively consumed in the same factory remained eligible for cenvat credit, since the input was used in the manufacture of excisable goods and the finding that no such claim had been made was incorrect. The assessee therefore failed on the refund claim but succeeded on the credit claim.

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Issues: (i) Whether the assessee was entitled to refund of 8% paid on clearance of exempted final products under Rule 57CC of the Central Excise Rules. (ii) Whether cenvat credit of duty paid on molasses captively consumed in the assessee's own factory was admissible.

Issue (i): Whether the assessee was entitled to refund of 8% paid on clearance of exempted final products under Rule 57CC of the Central Excise Rules.

Analysis: The assessee used molasses for manufacture of both dutiable and exempted products and had paid 8% on the value of exempted clearances in terms of Rule 57CC. In view of the admitted factual position, the amount paid towards the exempted clearances was not refundable.

Conclusion: The refund claim of 8% was rejected and was against the assessee.

Issue (ii): Whether cenvat credit of duty paid on molasses captively consumed in the assessee's own factory was admissible.

Analysis: The duty paid on purchased molasses was already being taken as credit, and the alternative claim for credit on captively consumed molasses was recorded in the adjudication order. Since the captively consumed molasses were also used in the manufacture of excisable goods, the corresponding duty-paid input was eligible for credit. The appellate finding that no such claim had been made was incorrect.

Conclusion: Cenvat credit on the duty paid on captively consumed molasses was admissible and was in favour of the assessee.

Final Conclusion: The assessee did not succeed on the refund claim, but was granted credit of duty paid on captively consumed molasses for entry in its cenvat credit account.

Ratio Decidendi: Where inputs are used in the manufacture of both dutiable and exempted products, refund of the amount paid on exempted clearances is not available, but duty-paid captively consumed inputs remain eligible for cenvat credit if the statutory conditions for credit are satisfied.

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