2003 (1) TMI 753 - AT - Central Excise

Summary

Issues:
- Applicability of Rule 57 C.C. of the Central Excise Rules, 1944 on Sulphuric Acid manufactured and cleared at 'Nil' rate of duty.
- Maintenance of separate inventory and accounts for dutiable and exempt final products.

Analysis:

Issue 1: Applicability of Rule 57 C.C. on Sulphuric Acid:
The case involved the appeal by a company manufacturing Sulphuric Acid, questioning the demand for payment under Rule 57 C.C. for clearing the product at a Nil rate of duty. The company availed MODVAT credit under Rule 57A for inputs used in manufacturing. The Assistant Commissioner and Commissioner (Appeals) upheld the demand. The company argued that no credit was taken on certain quantities of inputs, making the demand incorrect. The company cited precedents and circulars to support its claim that Rule 57 C.C. was not applicable due to the nature of the final product being both dutiable and exempt. The Tribunal agreed with the company, noting that the MODVAT credit was reversed for exempted products, and the rule did not apply as no credit was taken on inputs used for exempted goods.

Issue 2: Maintenance of separate inventory and accounts:
The Revenue contended that the company did not maintain separate accounts for dutiable and exempt final products, thus necessitating payment under Rule 57CC(1). However, the Tribunal found that the company had immediately reversed MODVAT credit for exempted products, complying with Rule 57C(1). Citing legal precedent, the Tribunal emphasized that non-availment of credit did not imply non-usage of inputs. As the company did not take MODVAT credit for exempted products, Rule 57CC was deemed inapplicable. The Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the company.

In conclusion, the judgment clarified the non-applicability of Rule 57 C.C. on Sulphuric Acid cleared at a Nil rate of duty due to the company's compliance with MODVAT credit rules. Additionally, the Tribunal emphasized the importance of maintaining separate accounts for dutiable and exempt final products to avoid demands under Rule 57CC.