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TMI Blog2015 (11) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 denied Notfn 67/95 on the Oxygen Gas captively consumed and used in the manufacture of exempted goods viz. Sulphuric Acid but extended exemption benefit under various other notifications and held that oxygen was used in the manufacture of sulphuric acid which in turn was used in the manufacture of fertilizers. The adjudicating authority dropped the proceedings. 3. The appellant challenged the said order only contesting the excisability of the oxygen and the Revenue also challenged the said order against the dropping of demand. The Tribunal in the Final Order No.153, 154/07 dt. 20.2.2007 remanded the case to the Commissioner with direction to examine the applicability of the exemption notification and also to examine whether the oxygen manufactured in the oxygen plant of the assessee was indeed marketable so as to be exigible to levy of excise. The adjudicating authority in his de novo order confirmed the demand of Rs. 5,20,96,576/- towards excise duty on the quantity of oxygen consumed captively in the manufacture of sulphuric acid and removed without payment of duty during the period July 1997 to Feb 2002 along with interest and imposed equal penalty under Section 11AC. He als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and he submits that they have discharged the obligation under rule 6 (6) of CCR. They are covered under sub-rule (2) of Rule 6 of CCR 2002 that dutiable goods viz. oxygen manufactured in their plant is used in the manufacture of dutiable final product and not used as an input in the manufacture of any exempted product i.e. Sulphuric Acid. Therefore, they are eligible to benefit of exemption Notfn 67/95. 3.2 He relied Supreme Court's decision in the case of UOI Vs Hindustan Zinc Ltd. 2014 (303) ELT 321 (SC). He drew our attention to paras 2, 16, 20, 25 and 26 of the said judgement. He submits that Hon'ble Supreme Court on an identical issue, had clearly held that SO2 emerging as inevitable technological necessity is converted into H2SO4 as non-polluting measure, and sold to fertilizer manufacturers. He submits that Apex Court in the above judgement held that sulphuric acid was only a by-product and the conversion of SO2 to H2SO4 do not elevate sulphuric acid to a status of final product. There is no necessity to maintain separate records for zinc concentrate used in the production of H2SO4. He submits that the apex court decision is in relation to requirements of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of records, we find the short issue involved in the appeal relates to denial of benefit of captive consumption Notification No.67/95-CE dt. 16-3-1995 on the oxygen gas produced and captively consumed in the manufacture of Copper Anode. The adjudicating authority in his de novo order denied the exemption only on the ground that Sulphuric Acid (H2SO4) is a final product cleared at 'Nil' rate and held that since oxygen is captively used in the manufacture of Copper Anode (dutiable) and Sulphuric Acid (exempted) they are not eligible for Notfn 67/95. We find that H2SO4 was cleared at Nil rate the fertilizer plant claiming exemption under Sl.No.28 of Notification No.6/97 dt. 1.3.97. 7. On careful study of manufacturing process as explained in the proceedings, we find that the appellants have set up a plant only for manufacture of final product copper anode from the imported copper concentrate. It is seen that Oxygen is one of the essential inputs for conversion of Copper Concentrate into Copper Anode and it is used in the furnace and in the smelter converter to remove impurities contained in the copper concentrate. In the process of purification, sulphur dioxide SO2 emerges o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible for captive consumption of Oxygen under Notification No.67/95 as the final product copper anode is excisable which is cleared on payment of duty. 10. Notwithstanding above, we find that Hon'ble Supreme Court in the case of UOI Vs Hindustan Zinc Ltd. (supra) clearly held that what is manufactured in the final product is only copper only. In that case, Sulphur Dioxide was converted into sulphuric acid which cannot be considered as a final product but it is only a by-product. In view of the above facts, appellants are eligible for Modvat credit. The relevant paragraph of the apex court judgement is reproduced as under :- "2. At the outset, the controversy involved may be reflected by pointing out that the questions for consideration are as to the entitlement of the respondents/assessees to Modvat/Cenvat credit for the use of inputs in the manufacture of final products which are exempt or subject to nil rate of duty and the requirement of the assessee to maintain separate accounts with respect to inputs used in dutiable goods as well as exempted goods and the liability arising on the failure of the assessee to maintain such separate accounts. In Civil Appeal Nos. 8621 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer manufactures different kinds of tyres, one or more of which were exempt like tyre used in animal carts and cycle tyre, where car tyres and truck tyres attract excise duty. The rubber, the accelerators, the retarders, the fillers, sulphur, vulcanising agents which are used in production of tyres are indeed common to both dutiable and exempt tyres. Such assessees are mandated to maintain separate records to avoid the duty demand of 8% on exempted tyres. But when we find that in the case of the respondents, it is not as though some quantity of zinc ore concentrate has gone into the production of sulphuric acid, applicability of Rule 57CC can be attracted. As pointed out above, the entire quantity of zinc has indeed been used in the production of zinc and no part can be traced in the sulphuric acid. It is for this reason, the respondents maintained the inventory of zinc concentrate for the production of zinc and we agree with the submission of the respondents that there was no necessity and indeed it is impossible, to maintain separate records for zinc concentrate used in the production of sulphuric acid. We, therefore, agree with the High Court that the requirements of 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and by-product when the by-product emerged as a technological necessity. Accepting the argument of the appellant would amount to equating by-product and final product thereby obliterating the difference though recognised by the legislation itself. Significantly this interpretation by the Tribunal in Sterlite (supra) was not appealed against by the department." The Hon'ble apex court is clearly applicable to the facts of the case as in the present case the sulphuric acid is cleared as by-product as explained in the preceding paragraphs and the final product is only copper anode and not sulphuric acid. The waste gas which emerges out out of process of purification of copper concentrate in Sulphur Dioxide which is further converted into Sulphur Trioxide which is absorbed in Sulphuric Acid to form Oleum. This Oleum is dissolved in water to get purest form of Sulphuric Acid. It is pertinent to state that under the Environment (Protection) Rules, 1986 vide sub-rule (2) of Schedule I and as per Sl.No.21 of the Schedule I of the Environment Rules, it is mandatory for the appellant to prevent emission of oxides of sulphur in Smelter and Convertor of copper and it stipulates that wast ..... X X X X Extracts X X X X X X X X Extracts X X X X
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