2009 (3) TMI 904 - AT - Central Excise

Summary

Issues involved:
The judgment involves the issues of Modvat credit availed on inputs, duty demand for exempted goods, applicability of Rule 57CC of Central Excise rules, reversal of credit, and liability for duty payment in bond transactions.

Modvat credit and duty demand:
The respondent, a Public Sector Undertaking, availed Modvat credit on inputs for manufacturing products including Naftha. Dispute arose regarding clearance of Naftha to IOCL without duty payment, subsequently cleared to another entity under exemption. Show cause notices were issued for demanding duty due to lack of separate accounts for exempted goods. Commissioner held demands unsustainable due to reversal of credit by respondent.

Applicability of Rule 57CC:
The Commissioner relied on circulars allowing pro rata reversal of credit for exempted goods based on input value. Later clarification mandated reversal of 8% of exempted goods' value if separate records not maintained. Tribunal considered previous decisions where reversal of credit was deemed compliant with Rule 57CC, dismissing revenue's appeal against Commissioner's order.

Liability in bond transactions:
The Tribunal found Rule 57CC not applicable to the respondent as they did not claim exemption for duty payment on goods cleared to IOCL. Clearances under bond to IOCL did not make the respondent liable for duty, as the ultimate responsibility lay with IOCL. Previous decisions supported the view that reversal of credit sufficed as non-availment of credit, aligning with the Apex Court's stance.

Conclusion:
The Tribunal dismissed all three appeals by the revenue, emphasizing that the reversal of credit by the respondent for inputs used in exempted goods was in compliance with the rules. The liability for duty payment in bond transactions rested with IOCL, absolving the respondent from Rule 57CC obligations. Previous decisions and legal principles supported the Tribunal's decision in favor of the respondent.