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TMI Blog2022 (6) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants have installed Waste Heat Recovery Boiler; during the process of cooling steam is generated which is sold by the appellants to their sister concern in the adjacent premises who use it for manufacture of steam. Revenue proceeded to deny the Cenvat credit availed on the pollution control equipment i.e. Waste Heat Recovery Boiler and parts and accessories thereof on the grounds that they are utilized in the manufacture of steam which is exempted in terms of Rule 6 (4) of Cenvat Credit Rules, 2004. Revenue also proceeded to demand 10% of the sale value of the steam generated in the process in terms of Rule 6 (3) (b) and Rule 6 (3) (i) of CCR on the ground that some of the inputs were utilised in the generation of steam which is exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Ltd. Vs CCE Chennai II 2018 (5) RMI 1416-CESTAT Chennai 4. Learned Authorised Representative Ms. Sridevi Taritla appearing on behalf of the department reiterates the findings in the impugned order. 5. The brief issues that requires our consideration in the present case is as to whether the appellants are eligible to avail Cenvat credit on the pollution control equipment in terms of Cenvat Credit Rules and as to whether the appellants are required to reverse 10% of the Cenvat credit availed by them on other inputs for the reason that the steam generated is an exempted product. 6. Coming to the issue of availability of Cenvat credit on the capital goods i.e. pollution control equipment, we find that the Hon'ble Apex court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellants have manufactured steam which is an exempt product. Hon'ble Gujarat High Court in the case of Sterling Gelatin - 2011 (270) 200 (Guj) held that a bye product emerging in the course of manufacture cannot be treated as a manufactured product for the purposes of Rule 6 of Cenvat credit Rules. Hon'ble Court held that: "7. At this juncture, reference may be made to certain statutory provisions. Rule 6 of the Cenvat Credit Rules, 2002 makes provision for "Obligation of manufacturer of dutiable and exempted goods". Sub-rule (1) thereof provides that CENVAT Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing process adopted by the assessee, it is not possible to manufacture Gelatin without Mother Liquor coming into existence. Thus, when the entire quantity of input viz. Hydrochloric Acid is used in the manufacture of the final product being Gelatin which is a dutiable product, the mere fact that a by-product emerges during the process would not bring the by-product within the ambit of Rule 6 of the Rules so as to call for maintaining separate accounts in respect of the same. When the entire quantity of input is used in the manufacture of Gelatin, the question of maintaining separate accounts or of paying a percentage of the total price of the exempted goods would not arise. In the peculiar facts of the present case, sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile it was no doubt correct to say that ethylene and propylene had been used in or in relation to manufacture of ethane and methane, the identical quantity of the same goods had simultaneously been used in the manufacture of ethylene and propylene. The emergence of ethane and methane therefore, by itself, was not a ground to deny the benefit of the exemption notification. 10. In the facts of the present case, it is not as if by using a smaller quantity of input Hydrochloric Acid, the respondent could have averted the emergence of Mother Liquor. In other words, in the technology utilized by the respondent for the manufacture of Gelatin, the emergence of Mother Liquor was inevitable. Hence, while it is no doubt correct to say that Hydrochl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the judgment of Bombay High Court in Rallis India Vs UOI (supra) by observing that it was only a technological necessity that these lean gases were to be used to generate heat for generation of electricity. The aforesaid decisions have been relied upon by the Hon'ble Allahabad High Court in the case of Hi-Tech Carbon (supra) wherein similar situation had come up for consideration. The Ld. A.R has objected the application of this judgment contending that the said decision pertains to the period when erstwhile Modvat Credit Rules were in force. However, we find that the issue under consideration being exactly identical and the Hon'ble High Court having relied upon the decisions in the case of UOI Vs Hindustan Zinc Ltd. and Rallis Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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