TMI Blog2004 (2) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... which is dutiable, and ghee and husk are chargeable to NIL rate of duty. As per rule 57 C(1) of Central Excise Rules, 1944, modvat credit is not allowed on such quantity of inputs which is used in the manufacture of final products which are exempt from the whole of the duty of Excise or are chargeable to NIL rate of duty. according to Rule 57C(2) of Central Excise Rules, where a manufacturer avails of the credit of specified duty on any inputs and is engaged in the manufacture of any final product which is chargeable to duty as well as in the manufacture of any other final product which is exempt from the whole of the duty of excise or is chargeable to NIL rate of duty, the provisions of sub-rule (1) of Rule 57C shall be deemed to be satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57CC(1) for their failure to maintain separate inventory and accounts of the receipt and use of inputs, as required under Rule 57CC(9). He dropped the demand of ₹ 4,75,379/- related to husk. He also imposed a penalty of ₹ 5,00,000/- under Rule 173Q(1)(bb) of Central Excise Rules for failure to comply with the prescribed procedure under Rule 57CC. 3. Shri G. Shiva Dass, the learned Advocate for the appellants stated that the appellants are engaged in the manufacture of Bulk Horlicks. The raw-materials used in the manufacture of Horlicks are barley grains and wheat flour. The milk is received by the appellants from collection centers. It is tested for fat content and non-fat solids. Then it is pasteurised and stored. It is ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of horlicks in the same way as the husk emerges in the process of manufacture. The only difference is that while ghee emerges during the process of preparation of milk for the manufacture of Horlicks, the husk emerges during the process of preparation of barley grains and wheat for the manufacture of Horlicks. The Commissioner has recognized the husk as a by-product but failed to recognize ghee also as a by-product. The ghee and husk are by-products as recognized by the Government of India itself, as is evident from Notification dated 28.09.2001, issued by Ministry of Law, Justice and Company Affairs in connection with the Cost Accounting Records (Milk Food) Amendment Rules, 2001. Once ghee is recognized as a by-product, then the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIL, Bokaro Steel Plant Vs. CCE, Jamshedpur - 2002(142) ELT 574 (c) Hi-Line Pens Pvt. Ltd. Vs. CCE Delhi - 2003 (58) RLT 483 6. He further pleaded that in any case, they have reversed the total Modvat credit taken on the caustic soda lye and hydrochloric acid for the entire period in question and the said reversal was done much before the issue of the Show Cause Notice. Once the credit taken on the inputs has been reversed, then it would tantamount to not taking the credit at all and therefore, the provisions of Rule 57CC would not apply for that reason also. He relied on the following decisions. (a) Chandrapur Magnet Wires Ltd. CCE - 1996 (81) ELT 3 (SC) (b) Franco Italian Co. Ltd. Vs. CCE - 2000 (120) ELT 792 (L.B.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on these inputs after 01.11.1997, as is evident from the Order-in-Original itself. We find that the Supreme Court in the case of Chandrapur Magnet Wires Limited Vs. Collector of Central Excise, Nagpur reported in 1996 (81) ELT 3(SC), has held as under: 6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilized 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of the exempted final products. 7. In view of the aforesaid clarification by the Department, we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilized in manufacture of the final exempted product will stand deleted in the accounts of the assessee. 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. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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