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TMI Blog2025 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... duct/waste/refuse, Cenvat Credit cannot be varied or denied. With this statutory clarification demand under Rule 6 in respect of by-product is not applicable. This issue has been considered in various judgments as cited by Learned Counsel. Once it is established that the product in question is by-product then it is settled that in respect of by-product demand under Rule 6 will not sustain. Accordingly, in the present case also, Sulphuric Acid being a by-product, no demand under Rule 6 shall sustain.' Thus, sulphuric acid which is an unintended by-product, has further been used by the appellant for manufacture of phosphoric acid and the same has further found use in the manufacturing of Di-Ammonium Phosphate (DAP) which is chargeable to 1% rate of Central Excise duty as provided in Notification No. 12/2012-CE dated 17.03.2012 - Since the Di- Ammonium Phosphate (DAP) has been manufactured by utilizing a product which has emerged as unintended by-product, following the various legal pronouncements including the Hon ble Supreme Court decision in the case of BIRLA CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2005 (7) TMI 104 - SUPREME COURT] and in the case of Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant from the Sulphur dioxide gases emanating during the smelting of the Copper concentrate. It is matter of record that Copper concentrate Catalyst and Oxygen are the common inputs used for manufacture of goods cleared on payment of duty such as Copper Cathodes, Continuous Cast Copper rods, Sulphuric Acid etc as well as in the manufacture of exempted goods. The department is of the view that certain inputs like Business Auxiliary Service, Business Support Service, Cargo Handling service, C F Agent service, Customs House Agent services, General Insurance services, Manpower Recruitment or Supply Agency Service, Transport of goods by Road services, Works Contract services etc. are also common services for manufacture of both Copper products as well as Di-ammonium Phosphate (DAP). The department on the basis of above contention that certain inputs as well as input services have been used for exempted final products and therefore the Cenvat credit taken by them should have been reversed or paid as per the provisions of Rule 6 (3)(i) of Cenvat Credit Rules, 2004. As a consequence, following show cause notices and orders-in-original have been issued against which the appellants are before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for manufacturing Phosphoric acid. In Phosphoric Acid Plant the Sulphuric acid is reacted with rock phosphate to get Phosphoric acid. The Phosphoric acid which emerges from the above plant is captively consumed in Di-ammonium Phosphate Plant. Phosphoric acid is reacted with ammonia to get the Di-Ammonium Phosphate (DAP for short). He submits that the appellant have cleared DAP as a fertilizer classified under Central Excise Tariff sub heading 3105 3000 on payment of duty at the rate of 1% ad valorem in terms of Serial No. 128 of Notification No. 12/2012-CE dated 17.03.2012. 2.2 The learned advocate has further submitted that appellant have been issued various show cause notices proposing to demand reversal of 5%/ 6%/ 8%/ 10% as applicable during the relevant period on the value of exempted goods under Rule 6(3)(i) of the Cenvat Credit Rules, 2004. The details of the show cause notices are as follows : - Sr. No. SCN No. And Annexure No. Of Appeal No. E/10907/2019 Period Covered Amount Demanded Current status 1 V Ch.74(15)5Hindalco/D- BRH/Commr/ 08-09 dated 05.03.2010 (Annexure-2A) February 2005 To November 2009 Rs 60,42,92,975/- Dropped and not challenged 2 V.Ch.74(04)/Hindalco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 27.05.2016 dropped the proceedings initiated in the show cause notices demanding reversal under Rule 6(3)(i) of Cenvat Credit Rules, 2004 in relation to clearance of sulphuric acid, covering the period up to July 2015. The learned Adjudicating Authority while deciding various show cause notices by order dated 27.05.2016 has relied upon the judgment of Hon ble Supreme Court in the appellant s own case reported in 2014 (303) ELT 321 (SC). 2.4 Learned advocate has submitted that learned Commissioner vide the impugned orders-in-original dated 29.12.2016 and 30.01.2019, the details are above at table of this order, have been confirmed as period covered in these two impugned orders-in-original is post 01.03.2015 when the definition of non-excisable goods have been amended by the legislature. 2.5 It has been submitted by the learned advocate that the insertion of Explanation 1 to Rule 6(1) of the Cenvat Credit Rules, 2004 is not applicable to the present case. The Circular dated 25.04.2016 relied upon in the order- in-original dated 30.01.2019 also stands rescinded by the Board by Circular dated 07.07.2022. It has further been submitted by the learned advocate that sulphuric acid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2): Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002 on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 1 - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2 - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder. (Emphasis supplied) 2.8 The learned advocate submits that the above view is also supported by the following judgments of the Hon'ble Supreme Court:- (a) Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has contended that Sulphuric Acid is an unintended by-product, However, it appears that manufacture of DAP from Sulphuric Acid is Excisable product for which assessee has made conscious effort. From the records, it is quite clear that the process of smelting of copper core for manufacture of copper concentrate and Copper rods does not have any relationship to the manufacture of DAP. Manufacture of DAP is having totally different facility and is not even remotely connected to the manufacture of Copper concentrate or copper rods. Hence, it appears that manufacture of DAP is conscious effort and is intended excisable product. It is also a matter of record that some quantity of Sulphuric Acid is sold by the assessee to the manufacture of Urea or Phosphate. Hence, captive consumption of Sulphuric Acid is totally an independent activity from that of manufacture of Copper Concentrate. 9. Further, it also appears that some of the input services like Business Auxiliary Services, Business Support Services, Cargo Handling, Clearing and forwarding agent services, Courier, Custom House Agent Services, General Insurance Services. Manpower Recruitment and Supply Agency Services, Transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct for which assessee has made conscious effort. From the records, it is quite clear that the process of smelting of copper core for manufacture of copper concentrate and Copper rods does not have any relationship to the manufacture of DAP. Manufacture of DAP is having totally different facility and is not even remotely connected to the manufacture of Copper concentrate or copper rods. It is also a matter of record that some quantity of Sulphuric Acid is sold by the assessee to the manufacturer of Urea or Phosphate. Hence, captive consumption of Sulphuric Acid is totally an independent activity from that of manufacture of Copper Concentrate. Therefore, input services like Business Auxiliary Services, Business Support Services, Cargo Handling, Clearing and forwarding Agent services, Courier, Custom House Agent Services, General Insurance Services, Manpower Recruitment Supply Agency Services, Transport of goods by road (GTA), Works Contract Services, etc. are common to the entire manufacturing and selling operations of the assessee, including that of copper and DAP. Hence, use of common inputs and input services, on which the assessee has availed Cenvat credit and for which they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the challenge of the Circular dated 25-4- 2016 is that despite the insertion of Explanation 1 with effect from 1-3-2015, the Legislature has not removed the basis on which the judgment of the Hon ble Supreme Court was pronounced, and therefore despite the amendment treating certain non- excisable goods as exempted goods or final products, Sulphuric Acid would not be treated to be an exempted goods for the purpose of reversal of credit of input/input services in terms of Rule 6 of the Cenvat Credit Rules, 2004 and still the condition of manufacture of the exempted goods would be required. We noticed that the Rule 6 of the Cenvat Credit Rules, 2004, as it existed prior to 28-2-2015, provide as follows :- RULE 6. Obligation of a manufacturer or producer of final products and a provider of output service. (1) The Cenvat credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for exempted services, except in the circumstances mentioned in sub- clause (2). (2) Where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services, and manufactures such final products or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and which emerged unavoidably in the process of manufacture of other goods cannot be considered as goods manufactured by the appellant. Since disputed goods is not manufactured goods but the by-product which emerges/comes into existence in the process of manufacture of copper products, and therefore the production of Sulphuric Acid cannot be held to be manufacture of exempted goods. The judgment relied upon by the Ld. Advocate in the present matter squarely applicable and following the same we are also view that the demand cannot sustain. 14. We also find that the stand of the assessee is squarely covered by per para 3.7 of Chapter 5 of CBEC s manual which is reproduced below :- 3.7 CENVAT Credit is also admissible in respect of the amount of inputs contained in any of the waste, refuse or by-product. Similarly, Cenvat is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that Cenvat credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly. From the above para, it is clear that any inp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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