2010 (7) TMI 1064 - AT - Central Excise

Summary

Issues involved: Classification of spent sulphuric acid under chapter sub heading 28070010, admissibility of cenvat credit on inputs used in the manufacture of exempted goods, requirement of payment of 10% of value of exempted goods under Rule 6 of Cenvat Credit Rules, 2004.

Classification of spent sulphuric acid: Respondents cleared spent sulphuric acid at nil rate of duty for use in manufacturing fertilizers under notification No.4/2006-CE. Department contended that cenvat credit is not admissible on inputs used in manufacture of exempted goods u/s Rule 6(1) of Cenvat Credit Rules, 2002/2004 unless separate accounts are maintained u/s Rule 6(2). As respondents did not maintain separate accounts, they were required to pay 10% of the price of spent sulphuric acid cleared at nil rate of duty u/s Rule 6(3)(b).

Admissibility of cenvat credit: Rule 6(2) requires maintaining separate accounts for inputs used in dutiable goods and exempted goods. Failure to maintain separate accounts necessitates payment of 10% of the price of exempted goods. Show cause notices were issued to respondents for demand of duty and penalty due to lack of separate accounts.

Legal precedent and judgments: Commissioner (Appeals) ruled in favor of the assessee based on Tribunal's decision in CCE Indore Vs. S.R.F. Ltd. and Bombay High Court's judgment in Rallis India Ltd. Vs. UOI, holding that Rule 6 does not apply to bye-products like spent sulphuric acid. Tribunal's previous decision in a similar case also supported this interpretation, emphasizing that penal clause should not have been invoked when the issue was arguable. Revenue's appeals were rejected based on the above legal precedents and decisions.

Conclusion: The Tribunal rejected the Revenue's appeals based on legal precedents and judgments, finding no merits in the arguments presented. The issue of payment of 10% of value of exempted goods under Rule 6 of Cenvat Credit Rules, 2004 was deemed inapplicable to the clearance of spent sulphuric acid used in manufacturing fertilizers.