Rule 57CC and inter-unit stock transfers: no reversal of Modvat credit where goods were not sold.

Rule 57CC of the Central Excise Rules, 1944 was considered in the context of captive intermediate goods transferred from one unit of the same manufacturer to another unit. The rule required payment of 8% of the sale price when exempted goods were cleared by sale, but a stock transfer within the same manufacturer was not treated as a sale between independent legal entities. The text emphasises that taxing provisions must be construed strictly and cannot be expanded by adding words such as comparable-goods valuation or another unit's sale price. On that basis, Rule 57CC was not applicable to the inter-unit transfer.

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Issues: Whether Rule 57CC of the Central Excise Rules, 1944 applied to transfer of captive intermediate goods from one unit of the assessee to another unit, so as to require payment of 8% of the price for reversal of Modvat credit.

Analysis: Rule 57CC operated where inputs were used in relation to exempted final products and, in the alternative to maintaining separate accounts, required payment of 8% of the price charged by the manufacturer for the sale of such goods at the time of clearance from the factory. The disputed pulp was not sold by the Ballarpur unit but transferred to another sister unit. The expression used in the rule was sale of such goods, and sale required transfer between two independent legal entities. A stock transfer within the same manufacturer did not satisfy that requirement. The Department's attempt to substitute comparable-goods valuation or the sale price of goods from another unit would add words not found in the rule. Applying the principle that taxing provisions must be construed strictly, the rule could not be extended beyond its plain language.

Conclusion: Rule 57CC did not apply to the inter-unit stock transfer, and the demand for reversal of Modvat credit on that basis failed in favour of the assessee.

Ratio Decidendi: A taxing provision requiring payment on the sale price of exempted goods cannot be extended to an inter-unit stock transfer within the same manufacturer in the absence of an actual sale.

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