TaxTMI 
TaxTMI 
2010 (1) TMI 433
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....00 litres are exempted from payment of excise duty, subject to the condition that no credit of the duty was paid on the inputs used in the manufacture of such goods. The respondent-M/s Diplast Plastics Limited, Mohali-assessee (hereinafter to be referred as "the assessee") was engaged in the manufacture of PVC Pipes and Plastic storage tanks. The assessee had been maintaining a separate account of raw material i.e. plastic granules to be used in finished products i.e. two categories of water storage tanks of plastic. The Central Excise Officers were stated to have conducted detailed examination of the records in respect of the period of assessment years 1996-97 and 1997-98 and found that there has been an excess consumption of the manufactu....
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....nnexures A2 and A3). 6. Learned counsel for the revenue has contended that the assessee did not initially fulfill the condition and had not reversed the entire modvat credit of raw material in the finished exempted goods and as had reversed the credit only after being detected by the Department, therefore, the assessee was not eligible to avail the benefit of exemption. 7. On the other hand, learned counsel for the assessee has argued that admittedly, the assessee has already reversed the entire modvat credit of raw material, so the benefit cannot be withdrawn, in view of the law laid down by the Hon'ble Supreme Court in Chandrapur Magnet Wires (P) Ltd. v. Collector of C. Excise, Nagpur, 1996 (81) E.L.T. 3 (S.C.) and this Court in ....
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....s admittedly, the assessee is manufacturing exempted as well as dutiable goods using the same material. 11. An identical question was decided by the Hon'ble Supreme Court in Chandrapur Magnet Wires (P) Ltd.'s case (supra). Having interpreted the relevant provisions of Rule 57 of the Central Excise Act, 1994, it was observed by the Apex Court as under:- "It is true that the assessee has not maintained separate accounts of segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There i....
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....uty paid on the inputs used in the exempted products is debited in the credit account before the removal of the exempted final products. In view of the aforesaid clarification by the Department, we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of d....