PEPSICO INDIA HOLDINGS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s. Pepsico Holdings India Private Limited (PEPSI) manufacture dutiable aerated water and exempted soft drink SLICE. PEPSI availed MODVAT credit on inputs. They availed credit of duty paid on common inputs viz. furnace oil, sugar, activated carbon etc during the period 9/96 to 2/97. They did not maintain separate accounts for the receipt, issue and inventory of common inputs used in dutiable and exempted final products except sugar. Adjudging the notices issued to the assessee proposing to recover credit appropriate to inputs relatable to exempted final products or to recover 8% of the sale price of the exempted products in terms of Rule 57CC of the Central Excise Rules, 1944, the original authority demanded above Rs. 18 lakhs towards 8% of sale price of exempted final products cleared during the material period. As regards the credit availed in respect of furnace oil the original authority dropped the proceedings on the ground that PEPSI had already expunged credit relatable exempted SLICE. In the impugned order, the Commissioner (Appeals) upheld the order of the original authority including penalty of Rs. 50,000/ - imposed on PEPSI under Rule 173Q of the CER.

(2.) PEPSI is in appeal before us against the demand for recovery of 8% of the sale price on account of the assessee using common inputs other than furnace oil during the material period. The lower authorities held that reversing the entire credit taken on the common inputs involved after clearance could not remedy the omission to follow the procedure of maintaining separate accounts as prescribed in Sub -rule 9 of Rule 57CC of CER. In the impugned order, the Commissioner (Appeals) rejected the plea of PEPSI relying on the judgment of the apex Court in Chandrapur Magnet Wires (P) Ltd. v. Collector : 1996 (81) ELT 3 (SC) that reversal of the entire credit taken should be treated as having effectively not taken any MODVAT on these items. The Commissioner (Appeals) held that once the assessee had taken credit it had no option except to pay 8% of the sale price of the exempted goods.

(3.) WE have carefully considered the rival submissions. The requirement of having to reverse credit taken on any inputs when separate accounts are not maintained ceases once the assessee reverses the entire credit availed. The ratio of the judgment in Hello Minerals Water (P) Ltd (supra) is to the effect that the benefit of the notification subject to non availment of input credit was available even if the credit was reversed subsequent to removal of final products. This ratio holds good also in respect of the requirement to pay a percentage of the sale price of the exempted goods in terms of Rule 57CC. In the circumstances, we vacate the impugned order and allow the appeal filed by M/s. PEPSI.