2013 (3) TMI 322 - HC - Central Excise

Whether the assessee is liable to pay 8% on the price of the exempted final products viz., PD Pumps cleared from factory or 8% on the price of CI casting which was captively consumed by the assessee for the manufacture of those exempted goods viz., PD pumps - Held that - FAA has given a factual finding that the final product is not the CI castings alone and on the other hand, it is also the monobloc pumps which are exempted from payment of duty. It is also the finding of the first appellate authority that the assessee used various common inputs in both dutiable and exempted final products. Therefore, when further finding of not maintaining separate account is not disputed by the assessee, automatically, Rule 57CC(9) comes into operation. Assessee reliance on Texmo Industries Texmo Industries Vs. Commissioner of Central Excise, Coimbatore case 2006 (12) TMI 8 - CESTAT, NEW DELHI is not acceptable as perusal of the facts of that case shows that it was in respect of an exemption notification and the application of Rule 57A of the Central Excise Rules, thus unable to find any similarity on the facts of that case with the present one. Likewise, the other decisions relied show that they are distinguishable on facts and the decision of the Apex Court in the case of Ballarpur Industries Ltd., was not placed before the Court. At any event, relied on the subsequent decision in Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd.(2007 (8) TMI 10 - SUPREME COURT OF INDIA) wherein held that on even on stock transfer, Modvat is required to be reversed - allow the appeal filed by the Revenue by answering the questions of law in favour of the Revenue and against the assessee. Consequently the connected C.M.P. is closed. No costs.

Summary

Issues Involved:
1. Whether the final product is castings or PD pumps for the purpose of Rule 57CC of the Central Excise Rules, 1944.
2. Whether the payment of duty at the rate of 8% under Rule 57CC should be on the castings captively consumed or on the exempted PD pumps.

Issue-wise Detailed Analysis:

Issue 1: Whether the final product is castings or PD pumps for the purpose of Rule 57CC of the Central Excise Rules, 1944.

The Revenue contended that the assessee manufactures both dutiable products (like CI castings) and exempted products (like PD pumps) and uses inputs for both. The assessee did not maintain separate accounts for the inputs used in dutiable and exempted products as required under Rule 57CC(9). Consequently, the Revenue argued that the assessee should pay 8% of the sale price of the exempted PD pumps. The adjudicating authority initially dropped the proceedings, holding that CI castings were the final product. The first appellate authority, however, found that the final product was PD pumps, not CI castings, and the assessee failed to maintain separate accounts. The Tribunal reversed this, holding that CI castings were the final product, not PD pumps. The High Court, agreeing with the first appellate authority, held that the final product is PD pumps, not CI castings, and the assessee must pay 8% on the sale price of the exempted PD pumps.

Issue 2: Whether the payment of duty at the rate of 8% under Rule 57CC should be on the castings captively consumed or on the exempted PD pumps.

The Revenue argued that the assessee should pay 8% on the sale price of the exempted PD pumps since they did not maintain separate accounts for inputs used in dutiable and exempted products. The first appellate authority found that the assessee used inputs for both dutiable and exempted products and did not maintain separate accounts, thus liable to pay 8% on the sale price of the exempted PD pumps. The Tribunal, however, held that the final product was CI castings, not PD pumps, and therefore, the demand was not sustainable. The High Court, relying on the Supreme Court decision in Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd., held that the assessee must pay 8% on the value of the exempted goods (PD pumps) at the time of clearance from the factory, as they did not maintain separate accounts as required under Rule 57CC(9). The High Court rejected the Tribunal's decision, emphasizing the need to follow the first appellate authority's detailed findings and the Supreme Court's precedent.

Conclusion:

The High Court allowed the Revenue's appeal, holding that the final product is PD pumps, not CI castings, and the assessee is liable to pay 8% on the sale price of the exempted PD pumps due to non-compliance with Rule 57CC(9). The Tribunal's decision was overturned, and the first appellate authority's findings were upheld, supported by the Supreme Court's decision in Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd.