2006 (4) TMI 299 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57CC regarding the supply of exempted final product.
2. Determination of whether a part of the input is used in the manufacture of a by-product.
3. Application of Modvat Rules in cases involving the emergence of by-products.
4. Consideration of the legal position and relevant case law regarding the treatment of by-products in the manufacturing process.

Analysis:

1. The judgment addresses the interpretation of Rule 57CC concerning the supply of exempted final products. The appellant, a copper manufacturer, faced a demand under Rule 57CC(1) for paying 8% of the price of sulphuric acid supplied under Chapter X procedure, as it was considered an exempt final product. The appellant argued that Rule 57CC should not apply as the entire copper concentrate was used in manufacturing the dutiable final product, copper cathode.

2. The issue of whether a part of the input is used in the manufacture of a by-product is crucial. The appellant contended that the emergence of sulphur dioxide as a by-product during the smelting process of copper cathode did not alter the fact that the input was solely used for the dutiable final product. Citing the Supreme Court's ruling in a similar case, the appellant argued that no portion of the input could be attributed to the by-product.

3. The application of Modvat Rules in cases involving by-products was extensively discussed. The appellant highlighted that Modvat Rules do not deny credit on the portion of input attributable to the by-product. Rule 57D of the Central Excise Rules was cited to support the argument that the emergence of a by-product should not affect the credit on the input used in manufacturing the dutiable final product.

4. The judgment emphasized the legal position and relevant case law regarding the treatment of by-products in the manufacturing process. It was established that by-products, like sulphuric acid in this case, do not alter the equation between input and final product. The judgment referenced the Supreme Court's ruling in a previous case and a decision by the Tribunal in a similar matter to support the conclusion that no part of the input is used in producing the by-product.

In conclusion, the Tribunal allowed the appeal, setting aside the demand under Rule 57CC(1) and granting the appellant consequential relief based on the arguments presented regarding the treatment of by-products in the manufacturing process.