2017 (3) TMI 600 - AT - Central Excise

Benefit of N/N. 217/86-CE dated 2-4-86 - denial on the ground that quantity of caustic soda that goes in the manufacture of anhydrous sodium sulphate which is further used in the manufacture of rayon yarn will not be eligible for the benefit of exemption under N/N. 217/86 dated 2-4-86 as the final product i.e anhydrous sodium sulphate was exempted under N/N. 40/85 dated 2-4-86 - Held that - As per the provisio the exemption is not available to the input used in the manufacture of final product which are exempt whole of the duty of excise or is chargeable to Nil rate duty - In the present case the final product is anhydrous sodium sulphate which cleared under exemption N/N. 40/95-CE therefore exemption of N/N. 217/86-CE is not applicable on the caustic soda, manufactured and used in the manufacture of exempted anhydrous sodium sulphate - benefit rightly denied - appeal dismissed - decided against appellant.

Summary

Issues:
- Interpretation of exemption notifications for central excise duty on manufactured goods
- Applicability of exemption under Notification No. 217/86-CE to caustic soda used in the manufacture of anhydrous sodium sulphate
- Consideration of Tribunal Order No. 378/96 for similar cases
- Relevance of Rule 57 and Modvat credit for by-products

Analysis:

The case involved the appellant, engaged in manufacturing various chemicals, including caustic soda and anhydrous sodium sulphate. The dispute arose when the department alleged that the caustic soda used in the manufacture of anhydrous sodium sulphate, subsequently utilized in the production of rayon yarn, was not eligible for exemption under Notification No. 217/86-CE, as the final product, anhydrous sodium sulphate, was exempted under a different notification. The adjudicating authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner(Appeals).

Upon review, the Tribunal noted that the appellant did not appear but relied on Tribunal Order No. 378/96 to support their case. The appellant argued that caustic soda should be eligible for the exemption under Notification No. 217/86-CE, citing the captive use for anhydrous sodium sulphate production and subsequent use in rayon yarn manufacturing. They also contended that anhydrous sodium sulphate being a by-product should not be denied Modvat credit. The Revenue representative reiterated the findings of the impugned order.

The Tribunal carefully considered the submissions and the relevant notifications. It was established that caustic soda was used within the factory for the production of anhydrous sodium sulphate, which was further utilized in the manufacture of rayon yarn. However, as per the provisions of Notification No. 217/86-CE, the exemption did not apply to inputs used in the manufacture of final products already exempted from duty. Since anhydrous sodium sulphate was cleared under a separate exemption notification, the caustic soda used in its production was not eligible for the exemption under Notification No. 217/86-CE. Therefore, the demand raised by the adjudicating authority and upheld by the Commissioner(Appeals) was deemed in accordance with the law, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the impugned order, emphasizing the specific provisions of the exemption notifications and their application to the manufacturing processes and final products involved in the case.

Judgment:
The appeal was dismissed, and the impugned order was upheld, with the Tribunal pronouncing the decision on 23/02/2017.