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TMI Blog2005 (4) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... y provides that payment of duty at 8% may be done, if the manufacturer is not able to meet the requirement [under sub-rule (9)] of maintaining separate inventory and accounts of the receipt and use of inputs for the manufacture of goods on which exemption is claimed. Such payment of duty at 8% brings about the adjust (sic) of excess credit taken. In view of the above discussion and the ruling of the Tribunal in the case of M/s. Escorts Ltd.[ 2004 (8) TMI 216 - CESTAT, NEW DELHI] and Malviya Chemicals [ 2000 (11) TMI 401 - CEGAT, NEW DELHI] , the impugned orders are set aside and appeals allowed with consequential relief if any. X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sub-rule (1) or sub-rule (2) or sub-rule (9) of Rule 57CC. It is pointed out that Rule 57CC(1) required the manufacturers to pay an amount equal to 8% of the price in case if inputs are common and been utilised for manufacture of duty paid final products and exempted final product. Therefore it is submitted that in terms of Rule 57(1) and (2) read with Rule 57CC(1), when an amount equal to 8% of the price has been paid, then the credit cannot be denied as laid down in both the provisions. It is submitted that the same view has been expressed in the case of M/s. Escorts Ltd and Malviya Chemicals and Pharmaceuticals (supra). Several other contentions have been taken by the advocates and detailed written submissions have been filed from both the sides. 4. On a careful consideration we notice that the Tribunal in the case of M/s. Escorts Ltd. v. CCE (supra) has recorded the order as follows : "The appellant is a manufacturer of tractors. Small tractors (below 1800 CC are exempt from Central Excise duty. The appellant manufactured both dutiable and exempt varieties by using inputs on which Modvat credit was taken. They paid 8% of the value of the exempted tractors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is the rule laid down by the Supreme Court in its judgment in the Chandrapur Magnet Wires (P) Ltd. case (supra). The exemption claimed in that case was under Notification No. 69/86. It was a condition in the Notification that "No Credit of duty paid on goods used in the manufacture has been taken under Rule 56A of the Central Excise Rules." The appellant had initially taken Credit of the duty paid on the inputs used in the manufacture of the exempted goods but reversed the same. The Supreme Court held as under :- It "6. is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een taken on the inputs used in the manufacture of the exempted goods. In order to satisfy these requirements they paid Central Excise Duty of 8% as fixed for such cases under Rule 57CC. Rule 57CC relates to "adjustment of credit on inputs used in exempted final products or maintenance of separate inventory and accounts of inputs by the manufacturer". This rule is specific to cases where adjustment of credit is required to be made as the inputs have gone into the production of exempted final products. Sub-rule (1) of this Rule specifically provides that payment of duty at 8% may be done, if the manufacturer is not able to meet the requirement [under sub-rule (9)] of maintaining separate inventory and accounts of the receipt and use of inputs for the manufacture of goods on which exemption is claimed. Such payment of duty at 8% brings about the adjust (sic) of excess credit taken. In other words, it is, equivalent to reversal of credit on inputs. Therefore, the appellant had satisfied the requirement of not taking Modvat credit on the inputs used in the manufacture of exempted goods. Their case is specifically covered by Rule 57CC as well as the decision of Supreme Court with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond category of final products charged by the manufacturer for the sale of such goods at the time of their clearance from the factory. The amount mentioned in sub-rule (1) (2) shall be paid by the manufacturer by adjustment in the credit account maintained under sub-rule (7) of Rule 57G or in the accounts maintained under Rule 9 or sub-rule (1) of Rule 173G and if such adjustment is not possible for any reason, the amount shall be paid in cash by the manufacturer availing of credit under Rule 57A. The provisions of sub-rule (1) shall not (3) apply to final products falling under Chapters 50 to 63 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). The provisions of sub-rule (1) shall also (4) not apply to - (a) articles of plastics falling within Chapter 39; (b) tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40; (c) Black and White television sets, falling within Chapter 85; and (d) Newsprint, in rolls or sheets, falling within Chapter heading No. 48.01. which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. In the case of final pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression "only when" indicates that for the specified category of manufacturer, the requirement of sub-rule (1) will be treated as fulfilled only when the procedure of Rule 57CC(1) is followed. The expression "only when" indicates the requirement of Rule 57C(1) would not be treated as complied with in any other situation. To put it differently, if the latter part of Rule 57C(2) had not used the word "only when" in the expression "shall be deemed to be satisfied only when" but had employed the expression "shall be deemed to be satisfied when the manufacturer....", it could be suggested that the requirement of Rule 57C(1) would be satisfied if credit is not availed (using the expression loosely) on inputs used in the exempted product. Since the expression used is specific and clear, it is evident that the legislature wanted to make it clear that Rule 57C(1) can be treated as complied with if and only if the requirement of Rule 57CC(1) is fulfilled by the specified category of manufacturer. That is why the expression "only when" and not merely the word "when" is employed in the latter portion of Rule 57C(2). It is, therefore, clear that once an assessee manufactures dutiable and exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, the reference to common inputs has been made only to describe the type of manufacturer to whom the obligation of Rule 57CC(1) would apply. The fulfilment of the condition of Rule 57C(1) will not be confined, in such a situation, only to the credit taken on common inputs. The satisfaction of Rule 57C(1) would extend to the entirety of inputs used in the manufacture of exempted final product. Therefore, in view of the emphasis on the manufacturer in Rule 57CC(1) and reference to the manufacturer alone in Rule 57C(2), it is evident that the payment 8% under Rule 57CC(1) would ensure compliance with the requirement of Rule 57C(1) on the entirety of inputs used in the exempted final products including exclusive inputs as well as common inputs. In view of the above, payment of 8% under erstwhile Rule 57CC(1), enables the manufacturers to take credit on exclusive inputs also." 7. In view of the above discussion and the ruling of the Tribunal in the case of M/s. Escorts Ltd. and Malviya Chemicals (supra), the impugned orders are set aside and appeals allowed with consequential relief if any. (Operative portion of the Order already pronounced in open Court on conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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