Credit reversal provisions apply only to common inputs used in both dutiable and exempted products, not separate manufacturing streams.

Credit reversal under Rule 57CC, Rule 57AD(2) and Rule 6(3)(b) applies only where common inputs are used in both dutiable and exempted final products. Here, the disputed chemicals were used only in the manufacture of sugar, while the exempted bio-compost was produced from pressmud and waste matter. As the inputs were not used in relation to the exempted product, the statutory condition for reversal was not met, and the demand, penalty and interest could not be sustained.

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Issues: Whether Rule 57CC, Rule 57AD(2) and Rule 6(3)(b) were applicable where the disputed inputs were used only in the manufacture of sugar and not in the manufacture of the exempted bio-compost product.

Analysis: The competing orders below had found that the chemicals were used in the manufacture of sugar, while bio-compost was produced from pressmud and waste matter. On that basis, the requisite condition for applying the credit reversal provision, namely use of common inputs in both a dutiable product and an exempted product, was not satisfied. The record also showed that pressmud was treated as a waste product and the exempted bio-compost was not manufactured from the disputed chemicals. The earlier appellate orders and the accepted legal position on pressmud supported the view that the inputs were not used in relation to the exempted product.

Conclusion: The provisions were not applicable, and the demand, penalty and interest could not be sustained.

Ratio Decidendi: Credit reversal provisions apply only where common inputs are used in the manufacture of both dutiable and exempted final products.

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