2005 (8) TMI 266 - AT - Central Excise

Exemption denied for intermediate product despite payment under Rule 57CC. Duty demand upheld.

AUROBINDO PHARMA LTD. Versus COMMR. OF C. EX., HYDERABAD

The Tribunal held that the intermediate product was not entitled to exemption under Notification No. 67/95 when the final product was exempted, despite ... Cenvat/Modvat - Capital goods/inputs Issues:1. Whether the benefit of exemption Notification No. 67/95 is available to an intermediate product captively consumed when the final product, exempted under a different notification, is cleared on payment of 8% of the sale price in terms of Rule 57CC of the Central Excise Rules, 1944.Analysis:The appellant argued that the 8% amount paid is duty, making the intermediate product eligible for the exemption under Notification No. 67/95. The final product 'Pyrazynamide' was exempted at Nil rate of duty, but 8% of its sale value was paid under Rule 57CC due to common inputs used for dutiable products. The Revenue contended that the 8% amount is not duty on the final product, thus denying the exemption to the intermediate product. The Adjudicating authority demanded payment and imposed a penalty under the Central Excise Act, 1944.The Tribunal analyzed Notification No. 67/95 and Rule 57CC to determine the correct legal position. It noted that the final product 'Pyrazynamide' was exempted, and the 8% payment was not a duty on the final product but a requirement under Rule 57CC for common inputs used in exempted and dutiable products. Even if the 8% amount was considered duty, the benefit of exemption under Notification No. 67/95 would not apply when the final product is exempted. The Tribunal concluded that the intermediate product was not entitled to the exemption when the final product was exempted, despite the 8% payment under Rule 57CC. The duty demand was upheld, and the appeal was dismissed, with no justification for imposing a penalty due to the interpretation of Notification and Central Excise Rules.In summary, the Tribunal held that the intermediate product was not eligible for the exemption under Notification No. 67/95 when the final product was exempted, even though 8% of the sale value was paid under Rule 57CC. The Tribunal confirmed the duty demand but dismissed the appeal, emphasizing that an exempted item cannot be considered a duty paid item on payment of 8% amount when the final product is exempted.