TaxTMI 
TaxTMI 
2026 (7) TMI 587
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....pect of the furnace oil used in the factory for the manufacture of DBM, an exempted goods, need not be reversed, due to the fact that no sale is involved in their transactions and as per erstwhile Rule 57CC(1) & 57CC(8) reversal of credit is not required?" 3. Learned Standing Counsel for the petitioner submits that the Tribunal had followed the decision of the Bombay High Court in M/s.Ballarpur Industries Ltd. vs. Commissioner of Central Excise, Nagpur (2001 (138) ELT 94 (T-Mumbai), but, that judgment has been reversed by the Supreme Court in 2007 (8) SCC 89, allowing the appeal filed by the Department. An identical question has also been referred by this Court in R.C.P.No.27 of 2003 on 21.03.2005. 4.In view of the above, we direct the Tribunal to state a case and refer the same to us for our opinion. Accordingly, the reference case petition is closed." 2. Pursuant to the afore-extracted Order of this Court, 'the Customs, Excise and Service Tax Appellate Tribunal, Chennai' ['C.E.S.T.A.T.' for short] submitted Statement of Case. 3. Hereinafter, any reference to Rule 57CC shall be deemed to be a reference to Rule 57CC of the erstwhile Central E....
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....ing the ratio of decision in the case of Ballarpur Industries -vs- C.C.E., reported in 2001 (138) ELT 94 (Tri-Mum). 5. Heard on either side. Perused the materials available on record. 6. As stated supra, the following questions of law has been framed in this reference: "Whether the Hon'ble CEGAT, Chennai is legal and correct in upholding the impugned order that the credit availed in respect of the furnace oil used in the factory for the manufacture of DBM, an exempted goods, need not be reversed, due to the fact that no sale is involved in their transactions and as per erstwhile Rule 57CC(1) & 57CC(8) reversal of credit is not required?" 7. At the outset, this Court would like to extract the relevant portions of Rule 57CC for ease of reference: "57-CC. Adjustment of credit on inputs used in exempted final products or maintenance of separate inventory and accounts of inputs by the manufacturer.- (1) Where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as in any other final product which is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty and....
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....e production of such D.B.M., along with any other dutiable final products with or without any intermediate products within the same entity. In such a scenario, all the final products being dutiable in nature and so long as duty is paid on the final product, Rule 57CC would not come into picture at all, as Rule 57CC is concerned only with input utilised for the manufacture of either (i) exempted / nil-rated final product, or (ii) dutiable final product along with exempted / nil-rated final product. 9. On the other hand, if D.B.M. is cleared as such to any other factory or to a third party, that is to say, when it is not consumed within the same entity, it classifies as a final product. The final product - D.B.M. being excisable at nil-rate of excise duty, attracts the provision of Rule 57CC. On a bare reading of Rule 57CC, the usage of the words "other than inputs used as fuel" therein, would show that the mechanism of adjustment or maintenance of separate accounts provided thereunder applies only to non-fuel inputs and inputs used as fuel are exempted therefrom. In other words, when the MODVAT input credit is claimed is in respect of a fuel used in production of (i) an exempted ....
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.... 8. It is to be seen that the whole purpose of the notification and the Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57-D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where an intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the appellants, the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57-C would have no application. The mere fact that the parts are cleared from one factory of the appellants to another factory of the appellants would not disentitle the appellants from claiming benefit of Notification No. 217/86-CE dated 2-4-1986. As stated above, the notific....