2002 (12) TMI 170 - AT - Central Excise

Summary

Issues:
1. Liability of M/s. Ray Ban Sun Optics India Ltd. to pay 8% of the price of exempted goods under Rule 57CC of the Central Excise Rules, 1944.

Analysis:
The Revenue contended that the Respondents were liable to pay 8% of the price of exempted goods as per Rule 57CC, as they were manufacturing both dutiable and nil rate duty products. The Commissioner (Appeals) allowed the appeals, stating that as long as duty was paid on intermediate products, Modvat credit on inputs used was admissible, regardless of the final goods being cleared without duty payment. The Revenue argued that Rule 57CC applied since the final products were chargeable to nil rate duty. However, the Respondents maintained that Rule 57C was not applicable as they did not use the credit on inputs for exempted products, clearing parts for metallic frames and powered sun-glasses on payment of duty.

The Tribunal examined the situation and found that the inputs for which Modvat credit was availed were cleared on duty payment for further captive use in products chargeable to nil rate duty or exempted from excise duty. It was acknowledged that no credit was taken on inputs used for exempted products. Rule 57C prohibits credit on inputs used for products exempt from duty. The Tribunal clarified that duty must be shown to be levied on inputs used for exempted final products. The Department's stance that Modvat credit was only available if final products were chargeable to duty was rejected. Any product subjected to duty, even if used as an intermediary, is considered a final product for excise duty purposes. Since duty was paid on parts used in exempted products, it was deemed incorrect to claim that inputs were used for exempted products. Consequently, the Tribunal upheld the Commissioner (Appeals) decision, rejecting both appeals.