IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN THURSDAY, THE 25TH AUGUST 2011 / 3RD BHADRA 1933 C.E.Appeal.No. 6 of 2004() -------------------------- (FINAL ORDER NO.13962003 IN APPEAL NO.E/141/2002 PASSED BY CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, COCHIN.) .................... APPELLANT/RESPONDENT ---------------------------------------- COMMISSIONER OF CENTRAL EXCISE CALICUT COMMISSIONERATE, C.R.BUILDING, MANANCHIRA, CALICUT. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL,SC,CB EX SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR RESPONDENT/APPELLANT ------------------------ M/S. GRASIM INDUSTRIES LTD., MAVOOR, CALICUT. ADV. SRI.E.K.NANDAKUMAR THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 25/08/2011, ALONG WITH CEA NO.7 OF 2004 & 48/2005,THE COURT ON 25/08/2011 DELIVERED THE FOLLOWING: APPENDIX (CEA 6/2004) ANNEXURE A1: COPY OF ORDER 122/99 DT.20.12.99. ANNEXURE A2: COPY OF ORDER IN APPEAL NO.322/2001 DT.31.10.01. ANNEXURE A3: COPY OF CESTAT ORDER 1396/03 DT.17.9.03. ANNEXURE A4: COPY OF ORDER REPORTED IN 2002(51)RLT 177 CCE, INDORE Vs.NAVIN CHEMICAL ENTERPRISES. ANNEXURE A5: COPY OF ORDER REPORTED IN 2002(150) ELT 161 TRI. DEL NATIONAL ENGG. IND. LTD. Vs. CCE, JAIPUR. ANNEXURE A6: COPY OF SHOW CAUSE NOTICE ISSUED TO THE PETITIONER DT.1.4.99 WITH ANNEXURES. ANNEXURE A7: COPY OF ORDER REPORTED IN 2002(150) ELT 163(Tri. Kol)RECKITT BENCKISER LTD. Vs. CCE, BOLPUR. ANNEXURE A8: COPY OF ORDER REPORTED IN 2002(51) RLT 178(CEGAT DEL)CCE, DEL II Vs. SADHU FORGINGS LTD. ANNEXURE A9: COPY OF ORDER REPORTED IN 1994(73) ELT 835(TRI) KIRLOSKER OIL ENGINES LTD. Vs. CCE, PUNE. ANNEXURE A10: COPY OF CIRCULAR NO.107/96. TRUE COPY P.S. TO JUDGE C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... C.E. Appeal Nos.6&7 of 2004 & 48 of 2005 .................................................................... Dated this the 25th day of August, 2011. JUDGMENT Ramachandran Nair, J. Question raised in the connected three appeals filed by the department is whether the respondent-assessees are entitled to avail MODVAT credit in respect of duty paid on fuel used namely, furnace oil in the manufacture of goods. The goods manufactured are both dutiable and non-dutiable. Since accounts are not separately maintained for the fuel used for production of dutiable and non- dutiable goods, assessee claimed that no reversal of input duty credit availed for fuel is possible merely because part of the goods manufactured and cleared are duty free. Rule 57CC(2) providing for a mechanism to offset duty availed on inputs used for manufacture of exempted goods i.e. by reversing credit to the extent of 8% of the value of exempted goods cleared, is expressly not made applicable so far as fuel is concerned. So much so, the question before the Tribunal was whether by virtue of the difficulty or impossibility to have separate CEA 6/04 & conn. 2 accounts maintained by the assessee, assessee could avail full MODVAT credit on duty paid on fuel purchased, part of which was used for manufacture of exempted goods. 2. Before us Standing Counsel appearing for the appellants submitted that Rule 57CC(1) applies to that part of the fuel used for manufacture of exempted goods. Counsel for the respondents also pointed that the Supreme Court has considered the issue in the recent judgment in COMMISSIONER OF C.EX. Vs. GUJARAT NARMADA FERTILIZERS CO. LTD. reported in 2009(240) E.L.T. 661 wherein the Supreme Court held that proportionate reversal is required to be made for the fuel used in the manufacture of exempted goods. Certainly this is a matter which involves adjudication by the assessing authority based on data furnished by the assessee and on his being satisfied about correctness of the same. Following the judgment of the Supreme Court we allow these appeals by setting aside the orders of the Tribunal and by remanding the matter to the adjudicating authority to collect data from the assessees about total quantity of fuel purchased, the products manufactured in terms of volume, value etc. and CEA 6/04 & conn. 3 determine the MODVAT credit availed that is attributable to exempted goods produced and cleared without payment of duty and demand the actual duty payable for the assessees to make payment. Adjudicating authority is directed to pass orders after hearing the assessee and after collecting information from the assessee within a period of three months from the date of production of copy of this judgment. C.N.RAMACHANDRAN NAIR Judge P.S.GOPINATHAN Judge pms