TaxTMI 
TaxTMI 
2010 (3) TMI 1075
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....f agricultural tractors of engine capacity, not exceeding 1800 CC, as well as exceeding 1800 CC. The assessee has also been manufacturing internal Combustion engines of de-placement capacity below 1800 CC used in the manufacture of tractor, which was exempted from Central Excise duty, in view of the amended notification dated 1-3-1986. 2. The Revenue claimed that during the course of scrutiny of the record it revealed that the assessee undervalued the price of the engine, accordingly short paid the excise duty and wrongly claimed the Modvat credit. Consequently, show cause notice was issued to it (assessee) as to why (i) assessable value of IC engine be not fixed by adding 23% increase in its price, prevailing in the year 1993, (ii) d....
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....as deposited on the direction of the Commissioner (Appeals), vide his order (Annexure A2), but the same was rejected by the Assistant Commissioner, vide order dated 3-9-2003 (Annexure A7). The assessee filed the appeal, which was also dismissed by the Commissioner, vide order dated 30-1-2004 (Annexure A8). 6. Still aggrieved by the order (Annexure A8), the assessee filed the appeal which was accepted by the Customs, Excise & Service Tax Appellate Tribunal vide impugned order dated 4-8-2004 (Annexure A9). 7. The Revenue did not feel satisfied with the impugned order (Annexure A9) and filed the present appeal. 8. The following question of law arises for determination by this Court - "Whether credit of duty is admissible to....
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...., we are of the considered view that no interference is warranted in the impugned order. 12. However, the main argument of the learned counsel for the Revenue that since the assessee did not maintain the separate accounts of the inputs utilized for manufacture of dutiable and duty free goods, so it was not entitled for the indicated Modvat credit under Section 57C of the Rules is not only devoid of merit but misplaced as well. No doubt Rule 57C provides that no credit of the specified duty shall be allowed on such quantity of inputs which is used in the manufacture of final products on which no amount of excise duty is payable for any reason except the explanation mentioned therein but at the same time Rule 57CC postulates that "where....
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.... attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under :- 3. The credit account under Modvat rules may be maintained chapterwise, Modvat credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in s....
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....ese goods." The same view was reiterated by the Hon'ble Apex Court in Life Long Appliances Ltd.'s (supra). The observations of the aforesaid judgment "mutatis mutandis" are applicable to the present controversy. 13. This is not the end of the matter. In pursuance of the law laid in Chandrapur Magnet Wires (P) Ltd's cases (supra) the Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, Government of India issued Circular No. 232/66/96-CX., dated 25-7-1996 and clarified that the credit of the duty paid on common inputs is admissible when used in the manufacture of the final product (exempted and dutiable) provided the said credit of duty paid on inputs going into the exempted category of the final product is ....