K. Sankararaman, Member (T)

1. This is an appeal filed by M/s. East India Pharmaceutical Works Ltd., Calcutta challenging the order-in-appeal, dated 16-11-1989 passed by the Collector of Central Excise (A), Calcutta whereby he rejected their appeal before him and upheld the order-in-original, dated 2-2-1989 passed by the Assistant Collector of Central Excise, Calcutta 'C' Division. In terms of his said order, the Assistant Collector had disallowed Modvat Credit of Rs. 2,28,323.49 which amount had been paid as duty on inputs which were used in the manufacture of two final products; Locula and Cortola-M which became exempt from duty with effect from 1-3-1988. The Assistant Collector had based his decision on the provisions of Rule 57C of the Central Excise Rules, whereunder no credit of duty paid on inputs used in the manufacture of a final product shall be allowed if that final product is exempt from duty or chargeable to nil rate of duty. In their appeal before the Collector (Appeals) it was submitted by them that duty paid on the inputs received and utilised in the manufacture of final products which were cleared on payment of duty could not be disallowed on the ground that so