2024 (11) TMI 1040 - AT - Central Excise

Liability to pay 6% duty on by product namely Ammonium Sulphate - contravention of condition of Notification No.01/2011- CE - availment of Cenvat Credit on the inputs used in the Ammonium Sulphate - HELD THAT - It is found that in the present case the demand of differential duty of 5% i.e. as against the 1% duty paid by the appellant and 6% duty was demanded on the ground that appellant have availed the Cenvat Credit on the input and used in the Ammonium Sulphate, hence, the Ammonium Sulphateis liable to duty at the rate of 6% instead of 1%. It is found that in the facts of the present case, Ammonium Sulphate is generated unavoidably as by product, in case of by product it cannot be said that any input stage credit was availed even if, the by product is cleared at nil rate of duty Cenvat credit cannot be demanded only on the pretext that the entire input on which the credit was taken has been used in the manufacture of the final product and not in manufacture of by product. Therefore, the exemption Notification No.01/2011which carries the condition of non availment of Cenvat Credit on input cannot be denied. This issue is no longer res-integra, in the appellant s own case, HINDUSTAN CHEMICALS COMPANY VERSUS COMMISSIONER OF C.E. S.T. -SURAT-II 2024 (5) TMI 459 - CESTAT AHMEDABAD it was held that ' since the issue has been settled that Ammonium Sulphate being a by-product arising in the course of manufacture of final product, the demand under Rule 6(3) is not applicable. Accordingly, In the present case also being a similar issue, demand is not sustainable.' In view of the above decision in the appellant s own case, it has been held that the reversal under Rule 6(3) of Cenvat Credit Rules in respect of Ammonium sulphate being by product is not required to be made. This has been held with a view that Cenvat Credit on the input cannot be said to have been availed when any by product is cleared. Therefore, in view of the above settled position, the demand of excise duty on the Ammonium Sulphate which was made on the basis that the Cenvat Credit was availed on the inputs is not sustainable. The impugned order is set aside - the appeal is allowed.

Summary

Issues:
Whether the appellant is liable to pay 6% duty on the by-product Ammonium Sulphate due to availing Cenvat Credit on inputs used in its production.

Analysis:
The Appellate Tribunal considered the issue of liability for duty on Ammonium Sulphate in the present case. The appellant had availed Cenvat Credit on inputs used in the production of Ammonium Sulphate, leading to a demand for 6% duty instead of the 1% duty paid. The Tribunal noted that Ammonium Sulphate is generated as a by-product unavoidably, and in such cases, it cannot be considered that input stage credit was availed. The Tribunal referred to previous judgments in the appellant's own case, where it was established that Ammonium Sulphate, as a by-product, is not liable for duty under Rule 6(3) of the Cenvat Credit Rules. Therefore, the Tribunal set aside the demand for 6% duty, ruling in favor of the appellant.

In another instance, the Tribunal examined a similar issue regarding the liability for duty on Ammonium Sulphate, a by-product of the manufacture of Potassium Cyanide and Sodium Cyanide. The appellant had availed the benefit of a notification prescribing a concessional rate of duty subject to certain conditions. The Tribunal reiterated that Ammonium Sulphate being a by-product does not attract the provisions of Rule 6(3) of the Cenvat Credit Rules. Referring to previous decisions in the appellant's case, the Tribunal held that the demand for excise duty on Ammonium Sulphate, based on availing Cenvat Credit on inputs, was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed.

The Tribunal emphasized that the issue of liability for duty on Ammonium Sulphate had been settled in the appellant's own case through previous judgments. It was established that the Cenvat Credit on inputs cannot be considered as availed when a by-product like Ammonium Sulphate is cleared. Therefore, the demand for excise duty on Ammonium Sulphate was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal.

In conclusion, the Tribunal, based on settled positions in the appellant's own case, ruled in favor of the appellant regarding the liability for duty on Ammonium Sulphate. The demand for duty was set aside, and the appeals were allowed in both instances.