1992 (9) TMI 196 - AT - Central Excise

Summary

Issues: Classification of spent sulphuric acid under Central Excise Tariff Act, 1985; Availment of Modvat credit under Rule 57G of Central Excise Rules, 1944; Applicability of Notification 81/75 for exemption; Classification under Chapter 28 or Chapter 38; Interpretation of spent acid as a chemical product.

In the judgment by the Appellate Tribunal CEGAT, New Delhi, the case involved the classification of spent sulphuric acid under the Central Excise Tariff Act, 1985, and the availment of Modvat credit under Rule 57G of the Central Excise Rules, 1944. The appellant, engaged in manufacturing organic service active products, declared spent sulphuric acid as a raw material for availing Modvat credit. The dispute arose when the Assistant Collector classified spent acid under Chapter 28, limiting Modvat credit to the duty on concentrated sulphuric acid consumed in the sulphonation reaction. The Collector (Appeals) later classified spent acid under Heading 3823 as a chemical product, allowing Modvat credit and rejecting the restriction on credit imposed by the Assistant Collector. The tribunal analyzed the characteristics of sulphuric acid and spent acid, concluding that spent acid did not meet the criteria to be classified as sulphuric acid under Heading 28.07 but rather as a chemical product under Heading 38.23. Consequently, the tribunal upheld the entitlement of the appellants to Modvat credit for spent acid used in manufacturing processes, dismissing all three appeals.

The tribunal considered the production process of spent sulphuric acid, emphasizing that it was a by-product in the manufacturing of Nitrobenzene and acid slurry. The tribunal referred to the HSN Explanatory notes to differentiate between sulphuric acid and spent acid based on their chemical composition and properties. It highlighted that spent acid, containing a lower percentage of H2S04, lacked the defining characteristics of sulphuric acid, such as being corrosive, dense, and oily. The tribunal also cited the Atul Glass Industries case to establish the common parlance test for classification. As spent acid did not align with the attributes of sulphuric acid and was recognized as a chemical product in trade, it was deemed classifiable under Heading 38.23, supporting the Collector (Appeals) decision.

Regarding the Modvat credit issue, the tribunal clarified that Rule 57F did not apply to reverse the credit for sulphuric acid used in the manufacturing process. It affirmed the appellants' right to avail Modvat credit for spent acid, rejecting the restriction proposed by the Assistant Collector. The tribunal concluded that the appellants were entitled to the benefit of Modvat credit for spent acid, emphasizing that the credit should not be limited to the duty on concentrated sulphuric acid consumed during the sulphonation reaction. Consequently, the tribunal dismissed all three appeals, affirming the classification of spent acid as a chemical product under Heading 38.23 and upholding the appellants' entitlement to Modvat credit for the same.