Rule 57CC payments are not excise duty, so captive intermediate goods remain dutiable despite nil-rated final clearance.

Rule 57CC of the Central Excise Rules, 1944 applied where common Modvat inputs were used to manufacture both duty-paid goods and final products cleared at nil rate of duty. The amount payable under the rule, being 8% of the price of exempted or nil-rated final products, was not treated as excise duty and did not convert nil-rated clearance into duty-paid clearance. Accordingly, captive intermediate powder used to make nil-rated tablets remained liable to duty at the stage of its captive consumption, and the duty demand on that powder was upheld.

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Issues: Whether Rule 57CC of the Central Excise Rules, 1944 applied where the assessee manufactured one final product chargeable to duty and another final product cleared at nil rate of duty, and whether the payment of 8% of the price of the nil-rated goods could be treated as duty so as to exclude excise duty on the captive intermediate powder.

Analysis: The assessee took Modvat credit on common inputs used for both the duty-paid powder and the tablet form cleared at nil rate of duty. Rule 57CC required payment of an amount equal to 8% of the price of exempted or nil-rated final products where common inputs were used. The amount payable under that rule was held not to be excise duty, and nil-rate clearance could not coexist with treating the same final product as duty-paid merely because 8% of its price was paid under the rule. As the tablets were cleared at nil rate of duty, the powder used to manufacture them remained subject to duty at the stage of captive clearance.

Conclusion: Rule 57CC did not displace duty liability on the captively consumed powder, and the demand of duty at 18% ad valorem was upheld against the assessee.

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