TMI Blog1993 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... lurry. 2. Taking recourse to Rule 57-I of the Central Excise Rules, 1944 (briefly 'the Rules'), impugned notice dated 28-11-1991 (Annexure '6' to the writ petition) was served on the petitioner calling upon it to show cause why MODVAT credit to the extent of Rs. 36,798 /- should not be recovered from it. Brief reason for demanding the aforesaid amount given in the said notice, is that duty-paid input was not consumed in full in the manufacture of final product and that "the differential quantity is neither waste nor a product other than the said input except that it gets diluted and known as 'SPENT ACID'." The stand taken in the impugned notice is that the entire duty-paid input during the relevant period was not actually consumed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner has ample opportunity to have his say before the concerned Authority. 5. The MODVAT Scheme provides for instant credit of the excise duty paid on inputs when used in or in relation to the manufacture of final product. No doubt the duty paid input, which is not used in the manufacturing process, would not be eligible for the MODVAT credit. To take MODVAT credit, the final product should be dutiable. Where the final product is exempt from excise duty, no credit of the duty-paid on the inputs would be available. Let us proceed to find out whether on the facts and the circumstances of the case, it can be said that the entire relevant duty paid input was used in the manufacture of the final product. The MODVAT Scheme does not emphasise tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch separates the spent acid from the final product. Once the duty paid input is physically involved in the manufacturing process, that can be said to have been used despite the fact that the same is not fully assimilated in the final product. Hundred per cent absorption or assimilation of the duty paid input in the final product is not a sine qua non of MODVAT credit, but to take benefit of MODVAT Scheme, the petitioner is required simply to establish that the input was used in the manufacture of final product. The sulphuric acid (duty paid input) can be said to have been used by the petitioner in the manufacture of final product when the entire relevant quantity thereof was applied or subjected to the manufacturing process. 6. In M/s. Sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that methanol formed during the manufacturing process, possessed ethylene glycol contents. The question was whether the appellants became ineligible to claim set-off of duty on ethylene glycol used in the manufacture of polyester fibre to the extent it gave rise to methanol. In the premises, the Supreme Court held that even though a part of the ethylene glycol was contained in the methanol, yet the credit of duty could not be reduced to the extent of the ethylene glycol contained in the methanol as ineligible. The Supreme Court held that ethylene glycol was used in the manufacture of polyester fibre, though methanol had arisen as a part and parcel of the chemical reaction during the process of manufacture, when ethylene glycol interacte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be restricted to the duty element on the concentrated sulphuric actually consumed in sulphonation reaction. As a result of this Circular, the impugned notice seems to have been issued to the petitioner. 11. Our attention has been drawn to another circular dated 18-5-1992 (Annexure '1' to the rejoinder affidavit). The genesis of this circular is that several manufacturers of detergent represented against the existing instructions of the Board with regard to admissibility of MODVAT Credit on sulphuric acid used in the manufacture of detergent. MODVAT Credit as per the Circular dated 26-9-1988 was allowed only on the quantity of concentrated sulphuric acid actually consumed in the manufacture of final product. Collectors of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standing Counsel, therefore, urged that spent acid is a saleable commodity and under the said circular that can be cleared only on payment of duty, unless otherwise exempted from payment of duty. We refrain from going into this question, inasmuch as, it involves facts which cannot be decided under Article 226 and as it does not arise from the impugned notice. 15. Whether spent acid is a by-product; whether by-product contains only spent acid and whether that contains all the materials used in the manufacturing; if so, what is the ratio of the sulphuric acid therein; whether the spent acid is sold in the market and whether that fetches the same price which concentrated sulphuric acid does; whether by-product is exempt or chargeable to duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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