2024 (4) TMI 323 - AT - Central Excise

Reversal of Cenvat Credit - Ammonium Sulphate - by-product or not - applicability of provisions of rule 6(3)(1) of the Cenvat Credit Rules, 2004 or not - HELD THAT - The matter has been decided by this Tribunal in appellant s own case M/S HINDUSTAN CHEMICAL COMPANY VERSUS C.C.E. S.T. SURAT-II 2021 (12) TMI 1495 - CESTAT AHMEDABAD where it was held that since the issue has been settled that Ammonium Sulphate being a by-product arising in the course of manufacture of final product, the demand under Rule 6(3) is not applicable. Accordingly, In the present case also being a similar issue, demand is not sustainable. There are no merit in the impugned order and same is set aside - appeal allowed.

Summary

Issues involved:
The appeal involves the demand of reversal of Cenvat Credit availed by the Hindustan Chemical Company u/s Chapter 28 of the Central Excise Tariff Act, 1995, and the applicability of Rule 6(3) to the clearance of Ammonium Sulphate as a by-product.

Issue 1: Reversal of Cenvat Credit
The appellant, engaged in the production of Potassium Cyanide and Sodium Cyanide, availed CENVAT CREDIT SCHEME. During the production process, excess Ammonia left over in the Reaction System is neutralized using Sulphuric Acid to generate Ammonium Sulphate, a fertilizer exempt from Central Excise duty. The appellant argued that the demand of Central Excise duty at a higher rate is unsustainable as Ammonium Sulphate is a by-product and the provisions of Rule 6(3)(1) of the Cenvat Credit Rules, 2004 are not attracted. The technology is primarily for Potassium Cyanide and Sodium Cyanide production, and Ammonium Sulphate is an unwarranted by-product due to environmental constraints. The Tribunal, relying on previous decisions, held that the demand is not sustainable, and the impugned order was set aside, allowing the appeal.

Issue 2: Applicability of Rule 6(3) to Ammonium Sulphate
The Tribunal considered whether Ammonium Sulphate is a by-product and if Rule 6(3) is applicable to its clearance. Referring to a previous decision in the appellant's own case, the Tribunal observed that Ammonium Sulphate is indeed a by-product arising during the manufacture of the final product. As per the settled principle, the demand under Rule 6(3) is not applicable to such a by-product. Therefore, in the present case, the demand was deemed unsustainable, and the impugned order was set aside, allowing the appeal.

Conclusion:
The Tribunal ruled in favor of the appellant, holding that the demand for reversal of Cenvat Credit and the applicability of Rule 6(3) to Ammonium Sulphate were not sustainable. The impugned order was set aside, and the appeal was allowed on 03.04.2024.