Rule 57CC reversal not attracted where captively used diesel engines remained dutiable and no exempt input basis existed.

Rule 57CC did not require reversal of 8% on the value of the entire couple set where the captively used diesel engines remained dutiable. The analysis turned on the absence of an exempt captive input: since duty was payable on the diesel engines used in manufacture, the factual basis for applying Rule 57CC to recover an amount linked to the final goods did not arise. On those facts, reversal could not be demanded on the full value of the couple set, and the assessee's position was sustained.

---

---

Issues: Whether Rule 57CC of the Central Excise Rules, 1944 required reversal of 8% of the value of the entire couple set cleared without payment of duty, or whether reversal based only on the value of the diesel engine portion was sufficient.

Analysis: The appellants manufactured diesel engines and captively used them in the manufacture of couple sets. The record showed that the diesel engines used captively were not exempt from duty. Since duty was payable on the captive diesel engines, the factual foundation for invoking Rule 57CC to recover 8% on the differential value of the final goods did not arise. The dispute therefore did not justify demanding reversal on the value of the complete couple set when the captively used diesel engine itself remained dutiable.

Conclusion: The requirement to reverse 8% under Rule 57CC was not attracted on the facts, and the demand was unsustainable in favour of the assessee.

---