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2015 (11) TMI 1247 - CESTAT CHENNAI

2015 (11) TMI 1247 - CESTAT CHENNAI - 2016 (331) E.L.T. 255 (Tri. - Chennai) - Denial of benefit of captive consumption Notification No.67/95-CE dt. 16-3-1995 - denial of 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 - Held that:- Sulphuric acid is cleared as by-product as explained in th .....

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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 waste gases are to be utilized in the manufacture of Sulphuric Acid so as to prevent emission of Sulphur Dioxide. - as per Notfn 67/95, both input oxygen and the final products are rightly covered in the Table of the Notification. Proviso (vi) of the notification stipulates that this notification is applicable provided appellan .....

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mplied.

Following the Apex Court decision in the case of UOI Vs Hindustan Zinc Ltd. (2005 (2) TMI 119 - SUPREME COURT OF INDIA), we hold that appellants are eligible for benefit of Notfn 67/95 and the duty demand on the quantity of oxygen so used in the manufacture of sulphuric acid, is liable to be set aside. - Decided in favour of assessee. - Appeal No. E/164/2008 - FINAL ORDER No.41541/2015 - Dated:- 5-11-2015 - Hon ble Shri R. Periasami, Technical Member And Hon ble Shri P.K. Cho .....

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oduct, was cleared without payment of duty as per Notfn 6/97 dt. 1.3.97. Appellants also produced Oxygen gas (O2) falling under Chapter Heading 28.04 and captively consumed in the manufacture of copper anode and availed exemption notification No.67/95. The adjudicating authority in the first order No.27/03 dt. 12.8.2003 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 notif .....

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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 ₹ 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 unde .....

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o submits that for manufacture of copper anode, they require oxygen and they produce oxygen gas in their own plant and captively consumed in the manufacture of copper anode. He submits that while manufacturing copper anode, various waste gases viz. i.e. Sulphur Dioxide (SO2), Iron Oxide emerges out on account of removal of impurities contained in the copper concentrate. In terms of the Environment (Protection) Rules, 1986, Sulphur Dioxide and Iron Oxide cannot be let off in the atmosphere and th .....

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ion of sulphur-di-oxide (SO2) to sulphur-tri-oxide (SO3) and then to H2SO4, additional oxygen element which is present in H2SO4 is absorbed from the oxygen present in the water (H2O). He drew our attention to their reply to SCN (Page-50 of PB) at paras 3 to 8 where they explained that waste gas sulphuric acid which emerges in the process of purification of copper concentrate is converted into H2SO4 by taking atmospheric oxygen and Oxygen present in the water and not from the Oxygen produced from .....

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f 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 th .....

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entrate used in the production of H2SO4. He submits that the apex court decision is in relation to requirements of Rule 57CC and it is squarely applicable to the facts of this case. During manufacture of copper anode from the copper concentrate, SO2 produced as a waste gas which is again converted into sulphuric acid. Therefore, sulphuric acid is not a final product but it is only a by-product. 3.3 He further referred to para-13 of the first OIO dt. 12.8.2003 on the marketability. He submits tha .....

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s Vs CCE 2015-TIOL-2110-CESTAT-MAD (3) Hindustan Zinc Ltd. Vs CCE 2005 (181) ELT 176 (SC) 4. On the other hand, Ld. A.R reiterated the findings of OIO and explained the marketability of oxygen. He submits that oxygen is used in the manufacture of copper concentrate by which SO2 emerges which in turn is converted into sulphuric acid. Since Sulphuric acid is cleared without payment of duty under exemption Notfn 67/95, appellants are not eligible for Notfn 67/95 for availing exemption for 'oxyg .....

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rocess of conversion of SO2 to SO3 and converted to H2SO4. She further submits that appellants have set up independent plant for manufacture of sulphuric acid. She submits that in this case the Sulphuric acid was cleared to fertilizer units. She also relied the same case law in the case of UOI Vs Hindustan Zinc Ltd. relied by appellant to contend that the Hon'ble Supreme Court has held that sulphuric acid is an exempted product. 6. After careful consideration of the submissions of both sides .....

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tiable) 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 Co .....

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ut in the atmosphere. Further, as evident from their reply to SCN before adjudicating authority that oxygen is so generated in the plant is captively consumed only in the process of conversion of copper concentrate to copper anode and not in the manufacture of Sulphuric Acid. 8. During the process of conversion of SO2 to SO3, one more element of oxygen is added and this additional element of oxygen is not taken from the oxygen plant but from the atmosphere. The Sulphur Dioxide (SO2) combines wit .....

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ere for process of conversion of SO2 or SO3 or to Sulphuric Acid. Therefore, on merit itself it is established that oxygen produced captively is not used as an input in the manufacture of Sulphuric Acid and appellant is eligible for Notfn 67/95 on oxygen on merit. 9. Further, it is pertinent to state that so long as Oxygen produced in their plant is used captively in the manufacture of final product (i.e.) copper concentrate and cleared on payment of duty, the appellants are rightly eligible for .....

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ly in the purification of copper concentrate in the manufacture of copper anode. Therefore, appellants are 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 convert .....

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ts 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. 8621-8630 of 2010, we are concerned with sulphuric acid. In Civil Appeal No. 8631 of 2010, it is caustic soda flakes and trichloro ethylene. In Civil Appeal No. 2337 of 2011, the product is again s .....

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as to whether literal interpretation is to be given to Rule 57CC, it would be necessary to understand the properties of sulphuric acid. From what is explained above including the use of sulphuric acid for the production of zinc, it becomes apparent that sulphuric acid is indeed a by-product. In fact, it is so treated by the respondents in their balance sheet as well as various other documents which were filed by the respondents in the courts below. It is also a common case of the parties that H .....

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f final product. Technologically, commercially and in common parlance, sulphuric acid is treated as a by-product in extraction of non-ferrous metals by companies not only in India but all over the world. That is the reason why the department accepted the position before the Tribunal that sulphuric acid is a by-product. .... ..... ..... 20. Let us now examine the position contained in Rule 57CC on the touchstone of the aforesaid position. No doubt, Rule 57CC requires an assessee to maintain separ .....

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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 .....

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ischief of recovery of 8% under Rule 57CC on exempted sulphuric acid is not attracted. .... ..... ..... 25. These arguments may seem to be attractive. However, having regard to the processes involved, which is already explained above and the reasons afforded by us, we express our inability to be persuaded by these submissions. We have already noticed above that in the case of Birla Copper (C.A. No. 2337 of 2011) the Tribunal has decided the matter following the judgment in the case of Swadeshi L .....

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necessity and no part of ethylene glycol could be said to have been used in production of methanol and indeed it was held that the total quantity of ethylene glycol was used for the production of polyester. The fact in all these three appeals appear to be identical to the facts and the law laid down in Swadeshi Polytex (supra). Therefore, this judgment is squarely applicable. 26. Furthermore, the provisions of Rule 57CC cannot be read in isolation. In order to understand the scheme of Modvat cre .....

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manufactured with the same common inputs becomes understandable. This Rule did not talk about emergence of final product and a by-product and still said that Rule 57CC will apply. The appellant seeks to apply Rule 57CC when Rule 57D does not talk about application of Rule 57CC to final product 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 th .....

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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 waste g .....

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