2002 (1) TMI 136 - AT - Central Excise

Summary

Issues Involved: The issues involved in the judgment are the demand of duty, applicability of Rule 57CC to by-products, and challenge on the point of limitation.

Demand of Duty: The Commissioner confirmed a demand of duty against the appellant along with a personal penalty. The appellant, engaged in manufacturing iron and steel products, availed Modvat credit on inputs used in the production process. The dispute arose regarding the applicability of Rule 57CC, which requires debiting an amount equal to 8% of the value of final products cleared at nil rate of duty from the Modvat account. The appellants contended that Rule 57CC does not apply to the by-products or intermediate products arising during the manufacturing process. They also challenged the demand on the basis of limitation.

Applicability of Rule 57CC: The Tribunal analyzed the flow chart provided by the appellant, showing the use of inputs in the manufacturing process. It was observed that the inputs availed for Modvat credit were used in various stages leading to the emergence of final, intermediate, and by-products. Rule 57CC mandates payment of 8% of the price of final products cleared at nil rate of duty when inputs are used for both dutiable and exempted products. The Tribunal held that the provisions of Rule 57CC apply to all products, whether intended final products or by-products, as the rule does not make a distinction. The Tribunal emphasized that the inputs were essential for the emergence of the final products, including the by-products, thus justifying the demand of 8% of the price of exempted goods.

Reference to Larger Bench: The appellant referred to a decision by the West Zonal Bench holding that Rule 57CC does not apply to by-products. Due to the conflicting views, the Tribunal decided to refer the question to the Larger Bench for clarification on whether Rule 57CC is applicable to by-products cleared at nil rate of duty during the manufacturing process.