1996 (2) TMI 438 - AT - Central Excise

Summary

Issues:
Leviability of duty on spent sulphuric acid emerging after the use of concentrated sulphuric acid in the manufacture of chlorine.

Analysis:

1. The issue in the appeals pertains to the leviability of duty on spent sulphuric acid that arises after the concentrated sulphuric acid is utilized in the production of chlorine. The lower appellate authority upheld the duty demand on the spent sulphuric acid cleared from the appellant's unit under Rule 57F read with Rule 57D.

2. The appellant contended that spent sulphuric acid should not be subject to duty under Rule 57F(4)(a) as it has not undergone any process in the appellant's factory. The acid is solely used as a drying agent, and thus, it cannot be considered as having been through a manufacturing process.

3. The respondent argued that the concentrated sulphuric acid used in the appellant's unit participates in the manufacturing process of chlorine, indicating that the sulphuric acid has indeed undergone a process within the appellant's factory, making Rule 57F(4)(a) applicable.

4. The Tribunal noted that the issue at hand aligns with previous decisions, such as the case of M/s. Detergents India Ltd. v. CCE and M/s. Varuna Sulphonators Pvt. Ltd. v. UOI, which provide guidance on the application of relevant rules in similar contexts.

5. The Tribunal emphasized the correct utilization of Modvat credit under Rule 57A, highlighting that the notification specifies the conditions for availing credit on inputs used in manufacturing. It clarified that there is no requirement to declare the exact consumption of inputs in the finished product, as long as the inputs and finished products are specified in the notification.

6. The Tribunal further elaborated on the treatment of spent acid under the Modvat Scheme, emphasizing that once goods are brought in as inputs under the Scheme, their status changes, and any waste or by-product arising from the processing of inputs must be handled according to Rule 57F(4). The Tribunal concluded that the demand for duty on the appellants is not maintainable, and the appeal was allowed.

7. Referring to a judgment of the Allahabad High Court, the Tribunal affirmed that duty on spent sulphuric acid was correctly demanded from the appellants. Citing the circular dated 18-5-1992, which allowed Modvat credit on the full quantity of sulphuric acid used in manufacturing detergents, the Tribunal upheld the lower authority's order and dismissed the appeal.