Separate input accounts and no credit on exempted goods defeated the 8% Rule 57CC demand.

Where an assessee maintained separate inventory and accounts for inputs used in exempted clearances and did not avail Modvat credit on those inputs, the factual basis for demanding 8% of the value of exempted goods under Rule 57CC did not survive. The Range Superintendent's report confirmed separate records and non-availment of credit, and that report was never displaced. On that basis, the demand was held unsustainable and the issue was decided for the assessee.

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Issues: Whether the demand of 8% of the value of exempted clearances was sustainable when the assessee had maintained separate inventory and accounts of inputs and had not availed credit on inputs used in the exempted goods.

Analysis: The report obtained from the Range Superintendent recorded that separate inventory and accounts of receipt and use of inputs were maintained and that no Modvat credit had been availed on inputs used in the manufacture of the exempted paper board cleared under the exemption notification. That report was not dislodged at any stage. In these circumstances, the factual basis for demanding 8% of the value of exempted goods under Rule 57CC did not survive.

Conclusion: The demand was unsustainable and the issue was decided in favour of the assessee.

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