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2016 (8) TMI 495 - AT - Central ExciseWhether Cenvat credit is admissible on the input contained in by-product or whether Rule 6(3)(b) is applicable in respect of clearance of by-product under exemption - Held that - the Spent Acid is generated unavoidably during the course of manufacture of Linear Alkly Benzene Sulphonic Acid (LABSA). The main product is LABSA and the Spent Acid generates unintentionally and unavoidably in the process therefore by nature itself the Spent Acid is a by-product. The issue has been settled by various judgments. Moreover as per para 3.7 of Chapter 5 of CBEC Manual of Supplementary Instruction, it is clear that Cenvat Credit is admissible on the input contained in by-product/waste refuse. As, the Spent Acid is undoubtedly a by-product therefore, by the virtue of above provision as well as the issue does not remain as res-integra, in the light of the judgments, the demand of 10% of the value of the exemption goods in terms of Rule 6(3)(b) is not sustainable. - Decided in favour of appellant
Issues involved:
1. Interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 regarding clearance of by-products under exemption. 2. Classification of Spent Acid as a final product or a by-product in the manufacture of Linear Alkyl Benzene Sulphonic Acid (LABSA). 3. Admissibility of Cenvat Credit on inputs contained in by-products. 4. Application of relevant case laws in determining the liability for payment of duty on Spent Acid clearances. Analysis: Issue 1: Interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 The case involved a dispute regarding the applicability of Rule 6(3)(b) of Cenvat Credit Rules, 2004 on the clearances of Spent Acid under exemption. The Revenue contended that 10% of the value of the exemption goods should be paid as per the rule. However, the Tribunal ruled that the demand was not sustainable based on the nature of the Spent Acid as a by-product and the admissibility of Cenvat Credit on inputs in by-products. Issue 2: Classification of Spent Acid as a final product or a by-product The main contention was whether the Spent Acid generated during the manufacture of LABSA should be classified as a final product or a by-product. The Tribunal determined that the Spent Acid was unavoidably generated during the manufacturing process, making it a by-product rather than a final product like LABSA. This classification was crucial in deciding the liability for payment of duty on its clearances. Issue 3: Admissibility of Cenvat Credit on inputs contained in by-products The Tribunal relied on various judgments to establish that Cenvat Credit is admissible on inputs contained in by-products like the Spent Acid. The case law cited by the appellant's counsel supported the position that denying Cenvat Credit on inputs in by-products was not justified, further strengthening the argument in favor of the assessee. Issue 4: Application of relevant case laws Both parties presented case laws to support their arguments regarding the treatment of Spent Acid. The Tribunal considered the precedents cited by the appellant's counsel, emphasizing that the issue had been settled by previous judgments. The Tribunal's decision was influenced by the consistent legal interpretation provided by the cited cases, leading to the allowance of appeals by the assessee and the dismissal of the Revenue's appeal. In conclusion, the Tribunal ruled in favor of the assessee, allowing their appeals and dismissing the Revenue's appeal based on the classification of Spent Acid as a by-product, the admissibility of Cenvat Credit on inputs in by-products, and the application of relevant case laws supporting the assessee's position.
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