ORDER 1. The question raised in these appeals relates to the period post3-4-1986 up to 28-2-1987. The subject-matter of the dispute is whether the appellant assessee was entitled to pay duty on inputs which had been declared to be duty-free and then claim MODVAT credit in respect of the goods manufactured out of such inputs which themselves were also exempted from duty. The goods in question are junior tractors which are tractors which have less than 25 HP. The inputs as far as these junior tractors were concerned were exempted from payment of duty by Notification No. 239/86CE. 2. Prior to that date the parts for junior tractors were not exempted from excise duty. The appellant had accordingly paid the duty and availed of the MODVAT credit and reversed the entry at the time of clearance. According to the appellant this particular method was continued to be followed despite the exemption granted to the parts of 3-4-1986 as it was not possible for the appellant to keep track of the consumption of each component and it was difficult to devise and implement a scheme whereby the appellant could segregate the duty-paid items from the duty-free items. A representation was made in this connection to the Collector, Central Excise. According to the appellant, the Collector forwarded the representation to the Central Board of Excise and Customs and CBEC but in the meanwhile allowed the appellant to continue to pay duty on the exempted parts and to reverse credit on the clearance of the junior tractors. However, on 1-10-1986 the Collector made it clear that this procedure could not be acceded to by the Department. The further representation made by the appellant directly to CBEC was also rejected by CBEC which reiterated that the appellant would have to segregate the inputs and maintain separate accounts and storage facilities. It is not in dispute that subsequent to this rejection the appellant has done just that and has not followed the procedure as followed by it earlier. 3. It is also not in dispute that the appellant had in fact paid the duty on the procured components for the junior tractors and that the credit was not (sic) reversed ultimately when the junior tractors were cleared. That the appellant had violated the provisions of Rules 57-C and 57-F of the Central Excise Rules is also not questioned. 4. It is also not in dispute that the appellant had in fact paid the duty on the procured components for the junior tractors and that the credit was not (sic) reversed ultimately when the junior tractors were cleared. That the appellant had violated the provisions of Rules 57-C and 57-F of the Central Excise Rules is also not questioned. 4. In similar circumstances, this Court, by virtue of the fact that by the process as followed by the appellant if allowed would be revenue neutral, had allowed the assessee in that particular case to avail of the credit, at the time of the clearance of the finished products in CCE & Customs v. Narmada Chematur Pharmaceuticals Ltd.1 5. The learned counsel appearing on behalf of the respondent Department, however, contends that this might tantamount to condoning the violation of the Excise Rules by the assessee with impunity. We make it clear that for the admitted violation, the appellant will undoubtedly be liable to pay the penalty as prescribed under the Rules for such violation. 6. The Tribunal had held that the duty demanded by the respondent as well as penalty for availing credit were valid. While upholding the decision of the Tribunal, for the reasons stated by us earlier, we set aside the decision of the Tribunal insofar as it relates to demand of duty. 7. The appeals are, accordingly, disposed of. There shall be no order as to costs.