VAM ORGANIC CHEMICALS LTD. Vs. CCE, NOIDA

JUDGEMENT

(1.) IN this Appeal, filed by M/s. Vam, Organic Chemicals Ltd., the issue involved is whether provisions of Rule 57 C.C. of the Central Excise Rules, 1944 are applicable in respect of Sulphuric Acid manufactured and cleared at 'Nil' rate of duty.

(2.) Shri V. Lakshmikumaran, learned Advocate, submitted that the Appellants manufacture Sulphuric acid in the manufacture of which vanadium pentoxide is used in respect of which they avail of MODVAT credit under Rule 57A of the Central Excise Rules, 1944; that Sulphuric acid is cleared by them on payment of duty and also at Nil rate of duty; that three show cause notices were issued to them for demanding payment @ 8% of the price of the Sulphuric Acid cleared without payment of duty for the period from March, 1998 to August, 1999 in terms of Rule 57CC; that the Assistant Commissioner, under the Order -in -Original No. 40 -42/99 dated 3.12.1999, confirmed the demand which has also been upheld by the Commissioner (Appeals), under the impugned Order. The learned Counsel mentioned that the following quantity of input was received and used in process during the period in question.

(3.) COUNTERING the arguments, Shri R.D. Negi, learned Senior Departmental Representative, submitted that since the Appellants had not maintained separate inventory and accounts of the receipt and use of vanadium Pentoxide used in exempted as well as dutiable final products, they have to pay an amount equal to 8% of the price of exempted goods under Rule 57CC(1); that non availment of credit of Vanadium Pentoxide after March, 1998 does not mean that the same is not in use in the manufacture after March, 1998; that there are two types of final products - one is dutiable Sulphuric Acid and the other is exempted Sulphuric Acid; that the decision in the case of Indian Iron & Steel Co. Ltd. supra, is not applicable as therein the matter has been remanded. We have considered the submissions of both the sides. Revenue has not rebutted the contention of the Appellants that the MODVAT credit of the duty paid on the inputs taken by them in respect of first show cause notice dated 16.9.1998, has been reversed immediately after taking the same. The Revenue has also not rebutted their contention that in respect of period covered by the other two show cause notices, no MODVAT credit was availed of by them. In absence of any such rebuttal, the Revenue cannot claim that the Appellants had availed of the MODVAT credit of the duty paid on the inputs which have been used in relation to manufacture of the exempted products. We agree with the submissions of the learned Advocate that they had on receipt of first show cause notice reversed the MODVAT credit under Rule 57C(1) of the Central Excise Rules, 1944 which prescribes not taking of credit on such quantity of inputs which is used in the manufacture of final products which are exempted from the whole of the duty or are chargeable to nil rate of duty. It has been held by the Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. v. Commissioner of Central Excise : 1996 (81) ELT 3 (SC) : 1996 (62) ECR 361 (SC) that "we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilized in the manufacture of the final exempted product under Rule 57A." We do not find any substance in the submissions of the Revenue that non -availment of credit after March, 1998 does not mean that the input is not used in the manufacture after March, 1998. The provisions of Rule 57CC comes into operation only when the credit of the specified duty on any inputs is taken and the manufacturer does not maintain separate inventory and accounts of the receipt and use of the inputs for the manufacture of exempted as well as dutiable final products. In the present matter as the MODVAT credit has not been taken, it cannot be said that the inputs in respect of which credit was availed of has been used in the manufacture of exempted products. We therefore, hold that the Provisions of Rule 57CC are not attracted in the present matter. Accordingly the impugned Order is set aside and Appeal is allowed.