2021 (1) TMI 710 - AT - Central Excise

Seeking reversal of CENVAT Credit - demand of interest and penalty as well - exempt goods or not - removal of byproducts (i.e spent sulphuric Acid) under serial No 32 of Notification No. 04/2006 CE dated 1st March, 2006 to fertilizer manufacturing units following the procedure laid down under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)Rule 2001 - applicability of Rule 6 (3)(b) and Rule 6 (3)(i)(ii) of Cenvat Credit Rules, 2004 - HELD THAT - The appellant are engaged in manufacture of Chemicals namely Dichloro Nitro Benzene, etc. The appellants are availing Cenvat Credit in respect of certain inputs and inputs services during the process of manufacture Sulphuric Acid also comes into existence. The appellants were clearing such Sulphuric acid to manufacturers of fertilizers by availing benefit of Procedure Chapter X (Cleared at Nil Rate of Duty). Revenue is of the opinion that since common inputs and input services have been used for generation of Sulphuric Acid and appellant has not maintained separate records, the Appellant is liable to pay 5% on the value of clearances of Sulphuric Acid cleared under exemption Notification No 4/2006-CE 01.03.06 in terms of Rules 6(3) of the Cenvat Credit Rule. Identical issue was decided by the tribunal in the case of M/S NIRMA LTD. VERSUS CCE AHMEDABAD 2011 (4) TMI 379 - CESTAT, AHMEDABAD where it was held that Commissioner(Appeals)'s reference to Hon'ble Supreme Court s judgment in the case of M/s Nirma Chemical Works was on altogether different ground as it dealt with classification of Spent Sulphuric Acid and has got nothing to do with the provisions of Rule 6(3) of MODVAT Credit Rules. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of reversal of Cenvat Credit, Interest, and Imposition of penalty regarding the removal of byproducts under specific notifications.

Analysis:
1. Issue of Applicability of Cenvat Credit Rules: The main issue in the appeal was whether Rule 6(3)(b) and Rule 6(3)(i)(ii) of Cenvat Credit Rules, 2004 apply to the removal of byproducts, specifically spent sulphuric acid, under a particular notification. The Appellant contended that the removal of byproducts under the said notification did not require reversal of Cenvat Credit. The Adjudicating Authority disagreed, emphasizing the obligation to reverse Cenvat Credit under Rule 6(3) regardless of the notification.

2. Judicial Precedents: The Appellant cited numerous judgments by High Courts and CESTAT supporting their position that no reversal of Cenvat Credit is required upon the removal of spent sulphuric acid. These judgments, such as Nirma Ltd. v/s. CCE and Commissioner v/s. Nirma Ltd., established that byproducts like spent sulphuric acid are exempt from the obligation to reverse Cenvat Credit under Rule 6(3)(b) of the Cenvat Credit Rules, 2004.

3. Interpretation of Byproducts: The Appellant argued that the spent sulphuric acid was a residue of the input sulphuric acid used in manufacturing, not a byproduct subject to Cenvat Credit reversal. The Tribunal referenced previous decisions where it was established that spent sulphuric acid, being a waste or refuse, did not fall under the purview of Rule 6 of the Cenvat Credit Rules, 2004.

4. Decision and Ruling: After considering the arguments and precedents, the Tribunal set aside the impugned order, allowing the appeals. The Tribunal found that the issue was conclusively settled by previous decisions and approved by the High Court, leading to the decision that no reversal of Cenvat Credit was required for the removal of spent sulphuric acid under the specific notification.

In conclusion, the Tribunal's judgment clarified the applicability of Cenvat Credit Rules to the removal of specific byproducts, ruling in favor of the Appellant based on established judicial precedents and interpretations of relevant laws and notifications.