TMI Blog2007 (9) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... t a common input for the dutiable final product and the exempted by-products, the copper concentrate in the present case is a common input for the dutiable final product and the exempted by-product. The two cases are clearly distinguishable on facts. Therefore, we hold that the decision of the Larger Bench in Rallis India case cannot be considered to be a precedent for the present case. - E/1203-1204/2001 - 854-855/2007 - Dated:- 25-9-2007 - S/Shri P.G. Chacko, Member (J), P. Karthikeyan, Member (T) and M. Veeraiyan, Member (T) Smt. R. Bhagyadevi, SDR, for the Appellant. S/Shri N. Venkatraman, Sr. Advocate and M.N. Bharathi, Advocate, for the Respondent. [Order per: P.G. Chacko, Member (J)]. - We have been called upon to decide on the following questions referred by the regular Bench vide Misc. Order Nos. 624 625/07 dt, 13-7-07 [2007 (217) E.L.T. 443 (Tri.-Chennai)]:- "(a) Whether the decision, in Rallis India Ltd. v. CCE, Salem, 2007 (208) E.L.T. 25 (Tri-LB) can be followed as binding precedent; (b) Whether Rule 57CC is applicable to a manufacturer of excisable final product and excisable by-product - one dutiable and the other exempted - where both are manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57I read with Section 11A of the Central Excise Act and imposed a penalty on the party after finding that copper concentrate was common input for copper anodes (which was cleared on payment of duty) and H2SO4 (part of which was cleared without payment of duty) and therefore Rule 57CC(1) was invocable against the respondents. Aggrieved by the Asst. Commissioner's decision, the respondents preferred an appeal to the Commissioner (Appeals) contending that (a) their only final product was copper anodes, which was cleared on payment of duty and H2SO4 was only a by-product which arose during the manufacture of copper anodes and therefore Rule 57CC was not applicable (b) their case was covered by Rule 57D which allowed Modvat credit on inputs contained in a by-product also. The appellate authority accepted the case of the party. After examining the provisions of Rule 57CC(1) and Rule 57D(1), it held that H2SO4 was a copper by-product only and not a final product and that use of copper concentrate as input was only for manufacture of copper anodes as final product. On this basis, it was held that Rule 57CC was not applicable while Rule 57D was applicable. Ld. Commissioner (Appeals) relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at H2SO4 is manufactured from SO2 and not from copper concentrate and that copper concentrate is not input for H2SO4 is contrary to facts; when an integrated, continuous and uninterrupted process starting with a basic raw material results in two or more products, such raw material should be held to be input for all the products [in this connection, ld. SDR has relied on the Supreme Court's judgments in CC v. Ballarpur Industries Ltd. - 1989 (43) E.L.T. 804 (S.C.) and CC v. Eastend Paper Industries Ltd. - 1989 (43) E.L.T. 201 (S.C.)]. (b) SO2 is a marketable commodity covered by Heading 28.11 of the CETA Schedule; it attracts levy of duty if sold and no levy of duty if captively consumed; as Chapter Note 1(a) states that Chapter 28 applies to separate chemically defined compounds, whether or not containing impurities, the impure SO2 generated at the smelting stage of copper concentrate gets squarely classified under Chapter 28.11; the respondents have consumed the gas captively in the manufacture of H2SO4; they have not paid duty of excise on SO2 cleared for captive consumption, by claiming exemption under Notification No. 67/95-C.E., dt 16-3-1995; thus the respondents have virtu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by-product is excisable as in the present case, Rule 57D(1) would not be applicable and Rule 57CC(1) would apply. (f) In the case of CCE v. Ramesh Food Products - 2004 (174) E.L.T. 310 (S.C.) = 2005-TIOL-07-SC-CX, the Hon'ble Supreme Court ruled that a Larger Bench decision should be followed by a Smaller Bench and, therefore, we must allow the present appeals by following the view taken by the Larger Bench in Rallises India case. For the above reasons, ld. SDR urged that both the referred questions be answered in the affirmative and the appeals be allowed. 4. Ld. Sr. Advocate for the respondents has stated his own reasons why Rallises India (supra) is not liable to be followed as a binding authority on the issue arising in the facts of the present case:- (a) In the case of CCE v. Shakumbari Sugar Allied Industries Ltd. - 2004 (176) E.L.T. 819 (Tri-Del), this Tribunal held that 'bagasse' generated in the course of manufacture of sugar from sugarcane was only a waste which could not be regarded as a final product and hence the provisions of Rule 57CC were not applicable; this decision was upheld by the Supreme Court on merits as per order dt. 22-8-2005 dismissing Civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed 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 against the decision in Hindustan Copper case; in the case of Birla Copper v. CCE, 2004-TIOL-874-CESTAT-Del. also, the raw material was copper concentrate, the final product was copper cathode and the by-product was H2SO4; it was held that the assessee was not liable under Rule 6(3) of the Cenvat Credit Rules (equivalent to Rule 57CC(1) of the Central Excise Rules, 1944) to pay 8% of the sale price of H2SO4 cleared to fertilizer manufacturers without payment of duty by following Chapter X procedure; the Revenue did not appeal against this decision. (f) Referring to the Tribunal's decision in GAIL case [2001 (136) E.L.T. 1019] relied on in the impugned order, ld. counsel has submitted that, though the department filed appeal against this decision, they did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic converter over four beds of vanadium pentoxide catalyst. The sulphur trioxide gas is absorbed by circulating sulphuric acid in the absorption towers and the product sulphuric acid is pumped to the storage tank. Alter the sulphur dioxide is received through the gas duct into the mixing chamber and later the drying tower, the inputs such as caustic soda flakes, ferric sulphate, ferric chloride, Indion, Magnafloc and other chemicals are added in the process for the sulphur dioxide to become sulphuric acid." Obviously, the copper contained in the ore viz. copper-iron sulphide has emerged 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. It 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct and the exempted by-product. The two cases are clearly distinguishable on facts. Therefore, we hold that the decision of the Larger Bench in Rallis India case cannot be considered to be a precedent for the present case. 10. Yet another submission made by the counsel is that, if copper concentrate is a chemical compound of copper, sulphur and other elements and is held to be common input for copper anode and sulphuric acid, it will not be physically divisible into a part which can be said to be used in the manufacture of one product and another part which can be said to be used in the manufacturer of the other product and, therefore, maintenance of separate inventory in terms of Rule 6(1) is not possible in respect of such input. We think, we need not consider this submission at this stage as we are sending the case back to the regular Bench. 11. The first issue referred to us stands answered in favour of the assessee. As regards the second issue, we are of the view that it should be dealt with by the regular Bench as and when the Hon'ble High Court's decision in the department's appeal against the Tribunal's final order in the assessees earlier case vide 2005 (191) E.L.T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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