TaxTMI 
TaxTMI 
2005 (4) TMI 224
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....e duty paid as well as exempted. They have paid 8% of price of the exempted product in terms of Rule 57CC and they availed Modvat credit in respect of final goods which are cleared without payment of duty. In both the appeals, the Commissioner has taken a view that the appellants are not entitled to avail Modvat credit in respect of common inputs which have gone into the manufacture of exempted final products. They have noted "It is also pertinent and definitely not out of place here to note that an amount of 8% already deposited by the assessee on the exempted goods in question cannot be adjusted towards the credit reversible as determined in this order. Reversal of such an amount is still obligatory on the part of the assessee since they have used other common inputs also in the manufacture of exempted as well as dutiable finished goods." This is the observation in the case of Aurobindo Pharma Ltd. As regards the finding in the case of Hetero Labs. Ltd., the Commissioner being the same has also in para 7 of the Order used the same paragraph to conclude his order. 2. The question that arises for consideration in both the appeals is as to whether the appellants can avail Modvat ....
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.... taken on the engines used in the exempt tractors on the ground that Modvat credit was not available in respect of inputs used in production of exempt goods. The demand is not being adjusted against the 8% payments made also. The contention of the appellant is that 2. the demand for return of Modvat credit is not correct in view of 8% payment on the exempted tractors. In any event, denial of Modvat credit and payment at 8% cannot be done. Reliance is placed on the decision of the Tribunal in the case of Malviya Chem & Pharmaceuticals (P) Ltd. v. CCE, Meerut [2001 (127) E.L.T. 274] in support of this contention. As against this, the submission of the learned SDR is that the engines used in the exempted tractors could not be treated as a "common input" for dutiable and exempted tractors. We have perused the records and considered 3. the submissions made by both sides. It is well settled that denial of Modvat credit as well as levy at 8% on the finished exempted product is not permissible in law. The appellants have been paying 8% of the price of the exempted goods at the time of their clearance. In such a case, Revenue cannot demand the reversal of Modvat credit. Th....
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....long 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 such exempted products is debited in the credit account before the removal of such exempted final products." This circular deals with a case where the manufacturer produces dutiable final products and also final products which are exempt from duty and it is not reasonably possible to segregate inputs utilised in manufacture of the dutiable final products from the final products which are exempt from duty. In such a case, the manufacturer may take credit of duty paid on all the inputs used in the manufacture of final products on which duty will have to be paid. This can be done only if the credit of duty paid on the inputs used in the exempted products is debited in the credit account before the removal of the exempted final products. In 7. view of the aforesaid clarification by t....
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.... is allowed." On our independent consideration, we find Rule 57C(1) applies when no credit of specified duty shall be allowed on such quantity of inputs which is used in the manufacture of final product (which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty) except when the final products are either - (i) ........ (ii) ........ (iii) ........ (iv) ........ (2) Where a manufacturer avails of the credit of specified duty on any inputs and he is engaged in the manufacture of any final product which is chargeable to duty as well as in the manufacture of 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) in the same factory, the provisions of sub-rule (1) or sub-rule (5) or sub-rule (9) of Rule 57CC are complied with, or where goods are exported under bond in terms of the provisions of Rule 13.] In terms of the above rule it is very clear when the provision of sub-rule (1) or sub-rule (5) or sub-rule (9) of Rule 57CC are complied with, the manufacturer can avail credit of special duty paid on the inputs. R....
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....inal products referred to (5) in sub-rule (3) or sub-rule (4) and excluded from the provisions of sub-rule (1), the manufacturer shall pay an amount equivalent to the credit of duty attributable to inputs contained in such final products at the time of their clearance from the factory. The provisions of sub-rule (1) shall also (6) not apply to final products, which are exported under bond in terms of the provisions of Rule 13. The provisions of sub-rule (1) shall (7) apply even if the inputs on which credit has been taken are not actually used or contained in any particular clearance of final products. If any goods are not sold by the (8) manufacturer at the factory gate but are sold from a depot or from the premises of a consignment agent or from any other premises, the price (excluding sales tax and other taxes, if any, payable) at which such goods are ordinarily sold by the manufacturer from such depot or from the premises of a consignment agent or from any other premises shall be deemed to be the price for the purpose of sub-rule (1). In respect of inputs (other than inputs (9) used as fuel) which are used in or in re....
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....refore, clear that once an assessee manufactures dutiable and exempted final products and takes credit of all the inputs and pays an amount of 8% as required under Rule 57CC(1), he would be deemed to have complied with the requirement of Rule 57C(1) and credit taken therefore on the input cannot be denied. It is evident that the wording of Rule 57C(2) and Rule 57CC(1) are descriptive of the type of manufacturer and have no nexus or bearing with the input used by the manufacturer. Consequently the fulfilment of conditions of Rule 57C(2) cannot therefore be taken to refer only to the credit taken on inputs used in both the categories of final products but has to be taken to refer to the entirety of inputs used in the manufacture of the exempted final product and dutiable final product. Therefore, once the manufacturer paid an amount of 8% as required in Rule 57CC(1), it would be deemed to have complied the requirement of Rule 57C(1). The requirement under Rule 57CC(1) is an obligation cast on the type of manufacturer mentioned in Rule 57CC(1) which is the same as the type of manufacturer dealt with and covered in Rule 57C(2). Therefore, once that category of manufac....