2006 (9) TMI 51 - AT - Central Excise

Cenvat/Modvat - In manufacture of a product a by-product is emerged and same transfer to sister unit at nil rate - HELD There is no sale,so credit used in such by-product was not required to be reversed

Summary

Issues:
Applicability of Rule 6 of Cenvat Credit Rules to byproducts; Challenge to findings of Commissioner (A) regarding spent sulphuric acid; Interpretation of spent sulphuric acid as excisable goods; Application of 8% reversal Rule; Transfer of byproduct to sister unit; Sale of goods and reversal of Modvat credit under Rule 57CC; Comparison of Rule 6 of Cenvat Credit Rules with Rule 57CC of erstwhile Central Excise Rules, 1944.

Analysis:
The appeal in this case was filed against the Order-in-Appeal passed by the Commissioner of Customs and Central Excise. The issue revolved around the appellants availing Cenvat credit for the manufacture of chlorine, resulting in the emergence of dilute sulphuric acid as a byproduct. The Revenue contended that the appellants were liable to pay 8% of the price of the spent sulphuric acid under Rule 6 of Cenvat Credit Rules. The original authority and Commissioner (A) upheld this demand, leading to a challenge by the appellants.

The appellants argued that Rule 6 was incorrectly applied to a residue or waste like spent sulphuric acid, which is neither excisable goods nor a final product. Citing legal precedents, including the decision in UOI v. Ahmedabad Electricity Co. Ltd., they emphasized that the spent sulphuric acid should not be considered excisable goods. They also highlighted cases like CCE v. Dharani Sugars & Chemicals and Aarti Drugs Ltd. to support their stance that byproducts do not attract the 8% reversal Rule.

Furthermore, the appellants pointed out that the spent sulphuric acid was transferred to their sister unit and not sold to a third party, thereby contending that Rule 6 and the 8% reversal were inapplicable. They relied on the Tribunal's decision in Wheel & Axle Plant v. CCE to support their argument that when goods are shifted for captive consumption within the same entity, no sale of goods occurs, and reversal of credit is not required.

Upon careful review of the case records, the Tribunal noted that the transfer of sulphuric acid to the sister unit did not involve a sale of goods, aligning with previous decisions where captive consumption did not necessitate credit reversal. Drawing parallels between Rule 6 of Cenvat Credit Rules and Rule 57CC of erstwhile Central Excise Rules, 1944, the Tribunal found that the issue was covered by existing precedents. Consequently, the appeal was allowed, setting aside the impugned order and providing consequential relief to the appellants.

In conclusion, the Tribunal's decision emphasized the non-applicability of Rule 6 to byproducts like spent sulphuric acid, especially when transferred internally for captive consumption, thereby aligning with established legal principles and precedents in similar cases.