2005 (7) TMI 21 - AT - Central Excise

Cenvat/Modvat- Inputs A part of I.C. Engine capitively consumed for manufacture of pumps I.C. Engine cleared by paying duty HELD I.C Engine as final product and demanded reversal of 8% of its value.

Summary

Issues:
Interpretation of Rule 57CC regarding reversal of value for captively consumed I.C. Engines used in manufacturing P.D. Pumps.

Analysis:
The case involved the respondents engaged in manufacturing I.C. Engines and P.D. Pumps. They cleared I.C. Engines by paying duty after availing Modvat credit for inputs. Part of the I.C. Engines was used captively in manufacturing P.D. Pumps, which were exempted from duty under Notification No./97-CE., dated 1-3-1997. The respondents reversed 8% of the value of captively consumed engines as per Rule 57CC. The revenue contended that 8% of the value of I.C. Engines fitted with P.D. Pumps should be reversed since the pumps were the final cleared product. However, the Commissioner (Appeals) disagreed, stating that I.C. Engines were final products themselves, requiring 8% value reversal. The original adjudicating authority had dropped the demand in subsequent cases, unchallenged by the revenue.

Upon reviewing the submissions, it was found that I.C. Engines were considered final products as they were also cleared by paying duty. Therefore, when cleared for captive consumption without duty, 8% of the engine's value had to be debited as per Rule 57CC. The rule mandated considering the engine's value, not the final product (P.D. Pumps) value in which the engines were used. Consequently, the revenue's appeals were deemed meritless and rejected by the Tribunal, upholding the Commissioner (Appeals) decision. The common order was passed for both appeals due to the identical issue involved.

This judgment clarifies the application of Rule 57CC in cases of captively consumed goods and emphasizes the importance of considering the value of the specific component involved rather than the final product's value for value reversal calculations.