2002 (12) TMI 656 - AT - Central Excise

Summary

Issues:
1. Liability of M/s. Indian Oil Corporation Ltd. to pay 8% of the value of Sulphur manufactured in Sulphur Recovery Plant.

Analysis:
1. The appeal involved the question of whether M/s. Indian Oil Corporation Ltd. was liable to pay an amount equal to 8% of the value of Sulphur manufactured by them in the Sulphur Recovery Plant. The appellant argued that the recovery of sulphur in the plant was independent of the intervention of any chemicals for which Modvat Credit was being availed. They contended that sulphur was a by-product and not their final product, and no Modvat input was used in the process. The appellant also cited a Tribunal decision and relevant rules to support their case. They further mentioned that sulphur was declared as a by-product in their registration application under Rule 174. They argued that the department was aware of the classification of sulphur and no suppression could be alleged against them, thus the extended period of limitation was not applicable. The appellant relied on previous Tribunal decisions to strengthen their argument.

2. On the other hand, the Revenue argued that sulphur obtained by the appellants from refining crude petroleum could not be considered a by-product. They contended that since separate accounts were not maintained for inputs used in sulphur manufacture, the provisions of Rule 57CC applied, requiring payment of 8% of the value of sulphur cleared from the factory. The Tribunal considered both sides' submissions and examined the process of manufacture explained by the appellants. It was observed that sour gases were obtained as a by-product during the refining process, from which sulphur was recovered in a separate unit. The Tribunal found no evidence that Modvat inputs were used in the sulphur recovery unit. The Adjudicating Authority's decision was based on the assumption that sulphur was an outcome of a composite manufacturing activity, but the Tribunal disagreed. They referred to a relevant decision involving the Gas Authority of India Ltd. and emphasized that the dutiability of a by-product was not the issue, but rather whether the product qualified as a by-product. Once established as a by-product, the benefit of Rule 57D applied, and the demand under Rule 57CC was set aside. Consequently, the Tribunal set aside the impugned order and allowed the appeal.