Indian Kanoon - Search engine for Indian Law

1. The brief facts of this case are that the appellants manufacture Paracetamol, a bulk drug falling under Chapter Heading 2942 of the Central Excise Tariff Act, 1985. They are also availing Modvat credit of duty on the inputs used in the manufacture of Paracetamol under Rule 57A of Central Excise Rules, 1944. In the manufacturing process, the product - Paracetamol emerges in the powder form which is cleared on payment of duty @ 18% ad valorem. A part of this powder is converted into tablets which are cleared without paying any duty, as the tablets are subject to 'Nil' rate of duty. The party in their Classification List dated 3-5-98 filed with the Central Excise authorities stated that since they availed Modvat credit under Rule 57A on the common inputs used in the manufacture of Paracetamol powder cleared on payment of duty @ 18% ad valorem and Paracetamol tablets chargeable to Nil' rate of duty, they debited duty @ 8% under Rule 57CC on the clearance of tablets. The Asst. Commissioner of Central Excise, Division-II, Ghaziabad in her Order dated 5-1-99 however rejected this approach of the assessee and directed them to pay duty @ 18% on the powder captively used in the manufacture of tablets which in turn are cleared by them paying duty at Nil' rate. The Asst. Commissioner has held the view that the provisions of Rule 57CC are not applicable on the facts of this case. On appeal of the party, the Commissioner (Appeals) Ghaziabad has upheld this view rejecting their appeal. This has led the party to file the present appeal.

2. We have heard Shri R. Krishnan, Advocate for the appellants and Dr. D.K. Verma, SDR for the Revenue. We have carefully' considered the submissions made before us. Under Rule 57CC, a manufacturer engaged in manufacture of any final product which is charge able to duty as well as any other final product which is exempted from whole of duty or is chargeable to Nil' rate of duty and the manufacturer takes credit of specified duty which is used in or in relation to manufacture of both the categories of final products, then the manufacturer shall pay an amount equal to 8% of the price of the second category (exempted or charged to Nil' rate of duty) charged for the sale of such goods at the time of their clearance from the factory. The main refrain of the argument of the ld. Advocate for the appellants before us is that following the provisions of Rule 57CC, the appellant had discharged duty @ 8% on clearance of Paracetamol tablets. Therefore the question of payment of any duty on Paracetamol at powder stage (intermediate product) would not arise, as under Notfn. No. 67/95 captively consumed goods are exempted from duty. We do not find much force in this argument. Admittedly, the Paracetamol tablets are subjected to Nil' rate of duty which in the own words of the appellants has led them to pay an amount equal to 8% of the price of these exempted goods in terms of the provisions of Rule 57CC. Therefore, in our considered view the amount of 8% on the price of the exempted category of goods liable to be paid in the terms and conditions of Rule 57CC is not Duty of Excise, for the simple reason that the chargeability to 'Nil' rate of duty or exemption from duty cannot co-exist with the payment of duty @ 8% on the price in respect of the same final product. The Asst. Commissioner has therefore rightly held that the provisions of Rule 57CC are not applicable in this case and since the Paracetamol tablets are cleared at 'Nil' rate of duty, the powder going into the manufacture of such tablets shall be subjected to duty @ 18% ad valorem. The appeal has, therefore, no force and the same is accordingly rejected.