Cenvat Credit on Byproduct/waste emerging from Manufacturing process

PJ/Case Laws/2011-12/1482

Case: - C.C.E., NOIDA vs LAXMI AGRO INDL. CONSULTANTS & EXPORTERS LTD.

Citation: - 2011 (274) E.L.T. 176 (All.)

Issue:- Cenvat Credit on byproduct/waste emerging from process of manufacturing – whether allowable?

Brief Fact:- This Appeal filed by Department under Section 35-G of the Central Excise Act, 1944, is directed against the order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi dated 11-3-2004 [2004 (178) E.L.T. 924 (Tribunal)), dismissing the appeal filed by revenue and confirming the order of the Commissioner (Appeals), Customs & Central Excise, Noida dated 12-9-2003, by which a demand of 8% on the price of spent Sulphuric acid was confirmed and the penalty was imposed.

Appellant’s Contention:- dismissing the appeal filed by revenue and confirming the order of the Commissioner (Appeals), Customs & Central Excise, Noida dated 12-9-2003, by which a demand of 8% on the price of spent Sulphuric acid was confirmed and the penalty was imposed.

The appellant has questioned the order on the following grounds:-

"I. Whether the spent Sulphuric Acid produced by the party is a dutiable product?
II. Whether provisions of Rule 57AD of the erstwhile Central Excise On appeal from 2004 (178) ELT. 924 (Tn. - Del.). Rules, 1944 and Rule 6(3)(b) of the Cenvat Credit Rules, 2001 are applicable in the present case?
III. Whether recovery mechanism in the matter is also available in the light of explanation II of the said Rule 6(3)(b); that if the said amount is not paid, it shall be recovered along with interest in the manner as provided in Rule 12 of Cenvat Credit Rules. The provisions of Rule 13 would also get attracted?"

Respondent’s contention:- The Respondent contention that eight per cent duty is provided only in case where there are more than one final products categoriesed in Rule 57CC, as second category of final product and that the process of manufacture is such in which the inputs in any final product cannot be easily determined or computed and separate inventtory and accounts of the receipt and use of inputs cannot be maintained.

Reasoning of judgment:- The Tribunal dismissed the appeal of the revenue and confirmed the appellate order on the ground that Rule 57-CC of the Central Excise Rules, 1944 cannot be legally invoked inasmuch as the 'Spent Sulphuric Acid' is not a final product which is manufactured along with the 'Acid-Slurry'. The 'Spent Sulphuric Acid', is a by-product as waste in the process of manufacturing/ of acid slurry on account of chemical reactions in the process of manufacture.

Rule 57CC of the Central Excise Rules, 1944 provided that where a manufacturer is engaged in the manufacture of final product which is chargeable to duty, as well as in any other (final product which is exempt from the whole of the duty of excise leviable there on or chargeable to nil rate of duty), and the manufacturer takes credit of the special duty on any inputs (other than the inputs used as fuel) which is used or ordinarily used in or in relation to the manufacturer of both the aforesaid categories of final product whether directly or indirectly, and whether contained in the said final product or not, the manufacturer shall, unless the provisions of sub-rule (9) are complied with, pay an amount equal to eight percent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory.

The CENVAT credit cannot be denied, nor the penalty can be imposed on the clearance of 'Spent Sulphuric Acid', as it is not a final product, which is manufactured along with 'Acid Slurry', attracting duty at 8% under Rule 57CC of the Central Excise Rules, 1944.

Decision:- Appeal Dismissed.

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PJ/Case Laws/2011-12/1482

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