1998 (9) TMI 243 - AT - Central Excise

Summary

Issues:
Modvat credit admissibility on sulphur used in the manufacture of sugar.

Analysis:
The case involved a dispute regarding the admissibility of Modvat credit on sulphur used in the manufacture of sugar. The Respondents, who were sugar manufacturers, claimed Modvat credit on inputs like Phosphoric Acid and Sulphur. The Superintendent initially denied credit on these inputs, leading to an appeal before the ld. Commissioner (Appeals). The ld. Commissioner allowed credit on sulphur but held the appeal on phosphoric acid as time-barred.

During the appeal, the Department argued that allowing Modvat credit on sulphur, used in the manufacture of sulphur dioxide for purification in sugar production, was incorrect. They contended that sulphur dioxide was duty-exempt under Notification No. 40/85-C.E., dated 17-3-1985, and therefore, Modvat credit should not be granted on sulphur used in its production. The argument was based on the premise that since sulphur dioxide was exempt, any input used in its manufacture, like sulphur, should not be eligible for Modvat credit.

In the absence of representation from the Respondents, the Tribunal proceeded with the hearing. It was established that sulphur was indeed used to produce sulphur dioxide, which, in turn, was utilized for sugar purification. The Tribunal noted that there was no evidence presented to prove that captively consumed sulphur dioxide for sugar production was exempt from duty. As sulphur dioxide was an integral part of the sugar manufacturing process, the Tribunal agreed with the ld. Commissioner's findings. Consequently, the impugned order allowing Modvat credit on sulphur was upheld, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal affirmed the admissibility of Modvat credit on sulphur used in the manufacture of sugar, emphasizing the importance of sulphur dioxide in the sugar production process. The decision highlighted the nexus between sulphur, sulphur dioxide, and sugar manufacturing, ultimately supporting the allowance of Modvat credit on sulphur as an input related to sugar production.