2005 (10) TMI 446 - AT - Central Excise

Summary

Issues:
1. Reversal of credit for inputs used in manufacturing exempted and dutiable goods.
2. Applicability of Rule 57C and Rule 57CC for input duty credit.
3. Quantity of inputs attributable to processing losses.
4. Tribunal's decision in CCE, Meerut-I v. Shakumbari Sugar & Allied Industries Ltd.
5. Board's Circular No. 267/136/97-CX.8.

The judgment addresses the issue of reversal of credit for inputs utilized in producing both exempted and dutiable goods. The respondents reversed the credit for inputs used in manufacturing exempted goods, leading to a demand by the Department related to the quantity of inputs linked to processing losses. The lower appellate authority initially set aside the demand.

Regarding the applicability of Rule 57C and Rule 57CC, it was argued that Rule 57C, applicable at the time, did not allow credit of input duty on inputs used for producing exempted goods. The Department contended that the reversal made by the appellants did not consider the total quantity of inputs used for manufacturing exempted goods, including processing losses.

The learned Advocate for the respondents defended the lower appellate authority's decision, citing the Tribunal's judgment in CCE, Meerut-I v. Shakumbari Sugar & Allied Industries Ltd. and Board's Circular No. 267/136/97-CX.8. However, the Tribunal found that these references did not support the respondents' case. It was held that the entire quantity of inputs for producing exempted goods, including processing losses, must be calculated to determine the credit to be reversed. The lower appellate authority's order was deemed incorrect and set aside for the period before 1-9-1996. The matter was remanded for re-quantification of the duty amount with a fresh order after providing a reasonable hearing opportunity to the respondents. The issues of penalty determination and time bar application were left open for further consideration.