Full Judgment
2. The demand and the penalty are based on a finding of the Commissioner that, by applying the provisions of Rule 57CC, the applicant was required to pay 8% of the sale price of boilers which were exempted from duty, which it manufactured by utilising exempted inputs. Counsel for the applicant does not deny the fact of such use of exempted inputs but says, that in such a situation, the Board has itself provided that such credit taken incorrectly is to be recovered under the provisions of Rule 57-I. It had already debited the credit that it took prior to clearance and therefore nothing more is required to be paid.
3. The Counsel for the applicant bases his reliance upon a circular of the Board dated 16-10-2001 reproduced in 2001 (133) E.L.T. T32. This circular was issued with regard to Rule 6 of the Cenvat Credit Rules, 2001. After explaining the provisions of Sub-rule (1) of Rule 6, it goes on to say :- "Consequently, where the assessee has not paid the amount (of 8% of the total price of exempted goods), the availment of corresponding credit on inputs is incorrect. The recovery of such credit taken incorrectly is squarely covered by the provisions of Rule 12 (erstwhile Rule 57-1)." 4. It seems clear to us from the circular for the reason that if the inputs were used in the manufacture of the exempted goods, such credit will be recovered in terms of Rule 57-1 and more of Rule 12. We find the spirit of this circular prima facie directly in contradiction to an earlier circular that it is not the duty and that the circular of the Ministry dated 27-9-1996. The conclusion in the latter circular is that the 8% of the value of the goods debited is not duty. If that is not duty, then what was taken prima facie and now sought to be reversed under Rule 57A would not be credit of duty.
5. However, if the department chooses to issue such contradictory circular, we cannot deny the consequent benefit to the assessee. The departmental officers are bound by such circular. The contention of the departmental representative that the circular relied upon was issued to clarify Rule 6 of the Cenvat Credit Rules and therefore will not apply to Rule 57CC is shown, prima facie to be incorrect from the circular itself which makes it clear that Rule 6 of the Cenvat Credit Rules corresponds to Rule 57CC and Rule 12 of those rules to erstwhile Rule 57-1. The statement of the Counsel for the applicant that the rules are identically worded (except for the numbers of other rules referred to) is also not rebutted by him, 6. We, therefore, waive deposit of the duty demanded and penalty imposed and stay their recovery.