2005 (8) TMI 266 - AT - Central Excise

Summary

Issues:
1. Whether the benefit of exemption Notification No. 67/95 is available to an intermediate product captively consumed when the final product, exempted under a different notification, is cleared on payment of 8% of the sale price in terms of Rule 57CC of the Central Excise Rules, 1944.

Analysis:
The appellant argued that the 8% amount paid is duty, making the intermediate product eligible for the exemption under Notification No. 67/95. The final product 'Pyrazynamide' was exempted at Nil rate of duty, but 8% of its sale value was paid under Rule 57CC due to common inputs used for dutiable products. The Revenue contended that the 8% amount is not duty on the final product, thus denying the exemption to the intermediate product. The Adjudicating authority demanded payment and imposed a penalty under the Central Excise Act, 1944.

The Tribunal analyzed Notification No. 67/95 and Rule 57CC to determine the correct legal position. It noted that the final product 'Pyrazynamide' was exempted, and the 8% payment was not a duty on the final product but a requirement under Rule 57CC for common inputs used in exempted and dutiable products. Even if the 8% amount was considered duty, the benefit of exemption under Notification No. 67/95 would not apply when the final product is exempted. The Tribunal concluded that the intermediate product was not entitled to the exemption when the final product was exempted, despite the 8% payment under Rule 57CC. The duty demand was upheld, and the appeal was dismissed, with no justification for imposing a penalty due to the interpretation of Notification and Central Excise Rules.

In summary, the Tribunal held that the intermediate product was not eligible for the exemption under Notification No. 67/95 when the final product was exempted, even though 8% of the sale value was paid under Rule 57CC. The Tribunal confirmed the duty demand but dismissed the appeal, emphasizing that an exempted item cannot be considered a duty paid item on payment of 8% amount when the final product is exempted.