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2020 (1) TMI 100 - AT - Central ExciseCENVAT Credit - clearance of spent acid (Sulfuric Acid) during the period from May, 2010 to March, 2011 - common inputs used for taxable as well as exempt goods - non-maintenance of separate records - violation of Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT - The issue involved herein is no more res integra, as it stands decided by the Hon ble Apex Court in the case of UNION OF INDIA OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. 2014 (5) TMI 253 - SUPREME COURT and also in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS GAS AUTHORITY OF INDIA LTD. 2007 (11) TMI 276 - SUPREME COURT , wherein the Hon ble Apex Court has distinguished between the final products and the by-products - After examining in detail the manufacturing process in both these cases, the Hon ble Apex Court has clarified that rigor of Rule 6 is applicable only in the case of two final products being manufactured by the assessee and not in the case of one final product and another waste product or the by-product being produced. It was clarified that so long as Sulfuric Acid in the former case and lean gas in the later case are obtained as by-product and not as final product Rule 57 CC / Rule 6 C of Cenvat Credit Rules, 2004 will not be applicable. Precondition for applicability of Rule 6 (1) is that there should be manufacture of exempted goods which can be clearly inferred from a bare perusal of Rule 6 (1). The obligation for reversal of credit can arise only in case of manufacture of dutiable final product and manufacture of exempted products, and in case the exempted goods are not manufactured there is no substantive liability for reversal of credit. Keeping in view the certificate of registration as produced by the appellant recording it to be registered manufacturer of detergent, soaps and cakes only, where spent Acid is a compulsive products as acid slurry, I am of the opinion that Department has failed to follow the judicial discipline - Despite the issue being clearly and properly adjudicated and clarified time and again with respect to the by-products/ waste products emerging during the process of manufacture of final product, the confirmation of demand in such cases still under Rule 6 of CCR is opined to be an act of judicial indiscipline on the part of adjudicating authorities. Appeal allowed - decided in favor of appellant.
Issues:
1. Applicability of Rule 6 of Cenvat Credit Rules, 2004 to the manufacturing process. 2. Classification of Sulfuric Acid as a manufactured product or a waste/by-product. 3. Compliance with maintaining separate records for dutiable and exempted goods. 4. Judicial discipline and adherence to higher appellate forum decisions. Issue 1: Applicability of Rule 6 of Cenvat Credit Rules, 2004 The primary issue in this case revolves around the applicability of Rule 6 of Cenvat Credit Rules, 2004 to the manufacturing process of the appellant. The Department contended that the appellant had not maintained separate records for dutiable and exempted goods, leading to a proposal for duty recovery under Rule 6. The appellant argued that Rule 6 was not applicable as they only manufactured dutiable goods and not exempted goods. The Tribunal referred to precedents and held that Rule 6 applies only when two final products are manufactured, distinguishing between final products and by-products. Issue 2: Classification of Sulfuric Acid Another crucial issue was the classification of Sulfuric Acid as a manufactured product or a waste/by-product. The Department argued that since the acid was being cleared to fertilizer companies, it qualified as an exempted good, justifying the application of Rule 6. The appellant contended that Sulfuric Acid was a waste/by-product and not a manufactured product, citing relevant case laws to support their stance. The Tribunal analyzed the manufacturing process and concluded that Rule 6 did not apply to waste products like Sulfuric Acid. Issue 3: Compliance with Record-Keeping The Department raised concerns about the appellant's failure to maintain separate records for dutiable and exempted goods, which was a requirement under Rule 6. The appellant emphasized that they were registered as manufacturers of detergents, soaps, and cakes only, and the spent Acid was a compulsive product, not a separate manufactured good. The Tribunal found that the Department had failed to follow judicial discipline by confirming the demand under Rule 6 without considering the nature of the waste products in the manufacturing process. Issue 4: Judicial Discipline Lastly, the issue of judicial discipline and adherence to higher appellate forum decisions was discussed. The Tribunal highlighted the importance of lower authorities following the declarations of law by higher appellate forums. It criticized the Department for not adhering to earlier Tribunal decisions and emphasized the significance of maintaining consistency in legal interpretations across similar cases. The Tribunal set aside the orders under challenge, allowing both appeals. In conclusion, the Tribunal's judgment addressed the complex issues surrounding the applicability of Rule 6, the classification of Sulfuric Acid, record-keeping compliance, and the importance of judicial discipline in legal proceedings. The decision provided clarity on the interpretation of relevant laws and emphasized the need for consistency in legal interpretations across different cases.
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