Purposive construction of Rule 57CC barred demand where common inputs were used only minimally and no wrongful credit advantage was shown.

Rule 57CC(1) of the Central Excise Rules, 1944 was construed purposively to target wrongful credit availment where exempted goods are wholly or substantially produced from common inputs. On the facts, the common inputs were used only to a negligible extent and the duty position had otherwise been regularised, so the assessee was not treated as having wrongly availed credit merely because separate inventory treatment under Rule 57CC(9) was not accepted. The demand under Rule 57CC was therefore held unsustainable, and the order was affirmed in favour of the assessee.

---

---

Issues: Whether Rule 57CC(1) of the Central Excise Rules, 1944 required payment of 8% of the value of exempted final products where the common inputs were used only in a minimal and insignificant quantity, and whether the assessee was denied credit for want of separate inventory under Rule 57CC(9).

Analysis: The applicable rules were construed in a purposive and reasonable manner. Although a literal reading of Rule 57CC(1) could support the revenue's contention, the Court held that the provision was intended to prevent wrongful availment of credit where exempted goods were wholly or substantially made from common inputs. On the facts found, the intermediate inputs were used only to a negligible extent, and the duty position was otherwise regularized. Those findings of fact were not reopened in appeal. In that setting, the Court held that the assessee could not be said to have wrongly availed credit merely because separate inventory treatment was not accepted as a ground for demand under the rule.

Conclusion: The demand under Rule 57CC was not sustainable; the issue was decided in favour of the assessee and against the revenue.

Final Conclusion: The tribunal's order was affirmed and the appeal was dismissed.

Ratio Decidendi: A rule requiring reversal or payment based on common inputs must be applied purposively, and it does not justify demand where the exempted product is only minimally derived from the common input and no wrongful credit advantage is shown.

---