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TMI Blog2007 (7) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of the phosphoric acid so manufactured is also cleared under Chapter X procedure without payment of duty, for the manufacture of fertilizers. The remaining portions of H2SO4 and phosphoric acid are cleared on payment of duty at appropriate rates to independent buyers. 2. During the period from May to October 1997 and from Nov '97 to April '98, the respondents had cleared 3678.69 MTs and 19780.895 MTs, respectively, of H2SO4 under AR-3A to fertilizer manufacturers without payment of duty under Notification No. 5/97-C.E. ibid by following Chapter X procedure they had not maintained separate inventory or accounts in respect of inputs used in or in relation to the manufacture of dutiable products and those used in or in relation to the manufacture of exempted products as required under sub-rule (9) of Rule 57CC of the Central Excise, 1944. Therefore, the department issued show- cause notices to them demanding Rs. 1,86,363.28 for the period May-Oct '97 and Rs. 6,30,242/-for the period Nov '97-April '98, being 8% of the sale price of H2SO4 cleared without payment of duty under Chapter X procedure. This demand was made in terms of sub-rule (1) of Rule 57CC. The Asst. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other final product" in Rule 5 covered all excisable goods manufactured and cleared without payment of duty on account of exemption from duty under Notification or charge ability to 'Nil' rate of duty. According to the appellant, H2SO4 which was cleared without payment of duty under Chapter X procedure was covered under the above expression and consequently Rule 57CC was applicable. It is also contended that Rule 57D was not applicable to the case as actual credit on inputs contained in H2SO4 cleared without payment of duty was not denied. Ld. SDR has reiterated these contentions of the Revenue. Her further submissions are that - (a) Sulphur is present in chemical combination with copper and other elements in copper concentrate; in the metallurgical process of extracting copper from the ore, the other elements are eliminated stage by stage to obtain pure copper; sulphur is eliminated as SO2 is converted to SO3; and the latter is converted to H2SO4; thus the manufacture of H2SO4 and copper anodes are linked to the basic input viz. copper concentrate; in other words, copper concentrate is the raw material for both copper anodes and H2SO4; therefore, the arguments that H2SO4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c (supra) were approved; the larger Bench has held that when an excisable by-product, manufactured intendedly or unintendedly, is a final product for purposes of Rule 57CC. (e) In the case of Swadeshi Polytex Ltd. v. C.C.E., 1989 (44) E.L.T. 794 (S.C.), set-off of duty paid on inputs used in the manufacture of polyester fibre (dutiable final product) was held to be not deniable under Notification No. 201/79-C.E., dated 4-7-79 on the ground that methanol had arisen as a non- excisable by-product; the third proviso to the said Notification was pari materia with Rule 57D(1) of the Central Excise Rules, 1944; the apex court was granting the benefit of this proviso to the assessee; this decision squarely supports the view taken by the Tribunal's Larger Bench in Rallis India case which is to the effect that Rule 57D(1) refers to waste, scrap and by-product which are not excisable; conversely, where the by-product is excisable as in the present case, Rule 57D(1) would not be applicable and Rule 57CC(I) would apply. (f) In the case of C.C.E. v. Ramesh Food Products, 2004 (174) E.L.T 310 (S.C.) = 2005-TIOL-07-SC-CX Hon'ble Supreme Court ruled that a Larger Bench decision should be followe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be obiter dictum. In his endeavour to establish that obiter dicta are not authoritative, ld counsel has quoted from the Apex Court's judgment in Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 S.C.C. 101. (e) In the respondents' own case reported as Sterlite Industries Ltd. v. C.C.E. 292 (191) E.L.T. 401 (Tri.-Che.), this Bench has held that the provisions of Rule 57CC are not applicable and those of Rule 57D are applicable the same view requires to be taken in the instant case inasmuch as the department has not obtained any stay of its operation; in the case of Hindustan Copper Ltd. v. C.C.E., 2006 (201) E.L.T. 295 (Tri.-Del.), this Tribunal followed the ratio of the Apex Court's decision in Swadeshi Polytex case (supra) and held that the assessee was not liable under Rule 57CC to pay 8% of the sale price of their by-product viz. H2SO4 which emerged in the manufacture of copper cathodes (dutiable final product) and was cleared without payment of duty under Chapter X procedure; in that case also the raw material was copper concentrate; the Revenue has not appealed the decision in Hindustan Copper case; in the case of Birla Copper v. C.C.E., 2004 (178) E.L.T. 838 (T) = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue, H2SO4 the excisable by-product which was cleared by the assessee under Chapter X procedure without payment of duty, should be treated as an 'ex empted final product' for purposes of Rule 57CC(1). Copper anodes were the dutiable final product as cleared on payment of duty. Since separate accounts were not maintained under Rule 57CC(9) by the assessee in respect of inputs used in or in relation to the manufacture dutiable final product and those used in or in relation to the manufacture of the exempted product (H2SO4) they pay 8% of the sale price of the exempted goods in terms of Rule 57CC(1). Ld. SDR has claimed support to this case of the Revenue from the Tribunal's larger Bench decision in Rallis India case (supra), wherein it was held that an excisable by product manufactured intendedly or unintendedly was a final product for purposes 57CC. She has relied on the apex Court's decision in Swadeshi Polytex case. On the other hand, ld. Sr. Advocate has argued that the decision of the larger Bench in Rallis India case is per incursion. We have stated in para 4 of his reasons if this order. He has asserted that the issue arising for consideration in the present case is already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acid." Obviously, the copper contained in the ore viz, copper-iron sulphide has as the final product viz, copper anodes, while sulphur which was present in chemical combination with the metals in the ore has been converted ultimately into its oxyacid viz, sulphuric acid (H2SO4) Hence it cannot be gainsaid that copper concentrate is common input for copper anodes and H2SO4 would be a gross error to take a different view which will militate against the chemistry of the assessee's process of manufacture. In the aforesaid final order [2005 (191) E.L.T. 401], however, it was held that copper concentrate was input for copper anodes only and not for H2SO4 We are unable to persuade ourselves to subscribe to such a view. We have also found merit in ld. SDR's submission that, where it was held that copper concentrate was input for copper anodes (dutiable final product) only, there was no room for examining the applicability of Rule 57CC. The Revenue is said to have preferred appeal to the Hon'ble High Court of Madras against the said order of this Bench. 8. We find that, for both copper anodes and H2SO4 copper concentrate is common input. The literature on the metallurgy of copper conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct and Phosphoryl 'A' & Phosphoryl 'B' as exempted by products, the manufacturer should pay 8% of the value of the exempted goods in terms of Rule 57CC(1) of the Central Excise Rules, 1944. The larger Bench noted that the assessee had, on the basis of expert's opinion, taken a stand before the apex court in the case reported as Rallis India Ltd. v. State of Tamil Nadu, 1999 (114) E.L.T. 5 (S.C.) that gelatine could be manufactured by boiling tender bones, ligaments, skin etc. with water under pressure. It noted that such stand of the assessee had been accepted by the apex court. On that basis, the larger Bench held that hydrochloric acid was not necessary as input for the manufacture of gelatine. It held that the party had used hydrochloric acid in the manufacture of Phosphoryl 'A' & 'B' Having held that hydrochloric acid was used in the manufacture of the by-products only (Phosphoryl 'A' & 'B') and not in the manufacture of the final product (gelatine), the question of applying Rule 57CC(1) did not arise for want of common input. However, the larger Bench proceeded to examine the provisions of Rule 57CC and Rule 57D and held that, where by-product was excisable but exempted from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be denied or varied on the ground that part of such inputs is contained in any waste, refuse or by-product arising during the process of manufacture of the said goods, irrespective of the fact that such waste, refuse or by product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty or is not mentioned in the declaration referred to in the Appendix to this notification." The Supreme Court held that, even prior to the above amendment, the only situation where input duty credit could be denied was only where the final product was wholly exempt from duty or chargeable to 'nil' rate of duty. The court further held the provision for 'set-off' under Notification 201/79 and the provision for 'proforma credit' under Rule 56A of the Central Excise Rules 1944 were identical and therefore CBEC's Circular No. 6/81-CX.6 dated 31-1-1981 on proforma credit was applicable to set-off also. This meant that the benefit of Explanation added (by Notification No. 8/81-C.E. dated 31-1-1981) sub-rule (2) of Rule 56A was available to the assessee claiming set-off of input-duty against duty on final product under Notification No. 201/79 for the period pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the manufacture of any goods, which are exempt from the whole of duty of excise leviable thereon are chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use of inputs for the aforesaid purpose, and shall not take credit of the specified duty paid on such inputs". Sub-rule (1) applies to a manufacturer of dutiable and exempted final products, who has used common inputs in the manufacture of both the final products without maintaining separate accounts for such inputs in relation to the two categories of final products. For reasons already recorded by us, the provision will be applicable to the present case if the excisable by-product, H2SO4 can be shown to be a "final product". The respondents call it "unintended by-product". We do not think that they did not intend to manufacture sulphuric acid. Intention has got to be gathered from the entirety of facts. The respondents have a phosphoric acid plant, wherein they use sulphuric acid in the manufacture of phosphoric acid from rock phosphate, which is imported for the purpose. It is not their case that phosphoric acid plant is indispensable for manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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