TMI Blog1999 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... le and no question of Modvat arises." 2. The facts leading to the above reference are, in brief, that the appellants were engaged in the manufacture of Acid Slury and Detergent Powder and one of the raw materials used by them is Sulphuric Acid classifiable under sub-heading 2807.00 of the Schedule to the Central Excise Tariff Act. They have opted for availing of the Modvat credit of the duty paid on the inputs under Rule 57A of the Central Excise Rules. During the process of manufacture, the LAB is Sulphonated by a strong Sulphuric Acid which result in the manufacture of Acid Slury which in turn is used in the manufacture of Detergent Powder. In this process of manufacture, Spent Sulphuric Acid is also obtained. The Collector (Appeals) under the order dated 31-12-1990 held that Spent Sulphuric Acid cannot be regarded as Sulphuric Acid as it contains a much lower percentage of H2SO4 i.e. 40 to 60% whereas Sulphuric Acid must contain H2SO4 between 77 to 100%; the Modvat credit is not to be reversed in respect of Spent Sulphuric Acid since the input Sulphuric Acid is not cleared as such from the factory of the appellants; that Spent Sulphuric Acid emerges only as by-product/waste du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed by him on the decision of the Supreme Court in the case of Indian Tool Manufacturer v. Asstt. Collector of Central Excise - 1994 (74) E.L.T. 12 (S.C.) wherein it was held that "if there is a general heading for the purpose of levy of excise duty, then every variety of goods falling under that general heading will have to be tested under that heading." The first proposition from the Revenue, therefore, was that clearance of Spent Sulphuric Acid amounts to clearance of inputs as such in terms of Rule 57F(l)(ii) of the Central Excise Rules, and therefore, is chargeable to Central Excise duty which should not be less than the amount of credit allowed in respect of such input. 4. Alternatively, it has been submitted on behalf of the Revenue that the duty of excise is chargeable on Spent Sulphuric Acid as a waste product arising in the course of manufacture of final product under Rule 57F(4) of the Central Excise Rules. The rule creates a deeming fiction that such waste is deemed to be manufactured in the factory of the manufacturer availing Modvat credit. In the case of U.O.I. v. Jalyan Udyog Ltd. - 1993 (68) E.L.T. 9 (S.C.), Hon'ble Supreme Court held that where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire quantity of Sulphuric Acid as the entire Sulphuric Acid has been used in the process of manufacture of the final product. He referred to the decision in the case of Varuna Sulphonator Pvt. Ltd. v. U.O.I. - 1993 (68) E.L.T. 42 (All.) in which it was held that "the Modvat scheme does not emphasise that during the manufacturing process, the entire duty paid input must be actually consumed, but the emphasis is on the use of the duty paid input in the manufacture of final product. The words 'used' and 'consumed' are not identical and synonymous." He further mentioned that this was also the view of the Tribunal in the case of Jaydee Agro Chemical (P) Ltd. v. C.C.E. - 1996 (84) E.L.T. 354 in which it was held that disallowance or the reversal of Modvat credit in respect of Spent Sulphuric Acid under Rule 57F(1)(ii) is not justified. A similar view was held by the Tribunal in the case of C.C.E., New Delhi v. Sarchem Surfactants Pvt. Ltd. - 1996 (87) E.L.T. 105. He further mentioned that even the C.B.E.C. has issued Circular No. 11/92-CX. VIII, dated 18-5-1992 confirming the above position. He further mentioned that the admissibility of Modvat credit on Sulphuric Acid is not contingent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifiable under Chapter 28 of the Tariff, the Tribunal had no occasion to examine whether Spent Sulphuric Acid emerges as a result of process of manufacture; that in Nirma Chemical Works v. C.C.E. - 1993 (63) E.L.T. 251 the main issue involved was whether Modvat credit was allowable on the process of manufacture. Having so held the Tribunal proceeded to observe that it cannot be said that Spent Sulphuric Acid cannot be considered as not a manufactured product. The Tribunal in that case held it to be a chemical product classifiable under Heading 38.23 of CETA. They contended that this decision was passed before the decision of the Supreme Court in Indian Aluminium Co., Moti Laminates and Hyderabad Industries cases. Regarding the second case holding Spent Sulphuric Acid classifiable under 38.23, the learned Advocate submitted that in DCW Ltd. v. C.C.E. - 1996 (81) E.L.T. 381, the Tribunal mainly proceeded on the ground that the appellants therein had agreed to pay duty on Spent Sulphuric Acid and as such it was a decision effectively based on concession made by the appellants. This aspect was specifically mentioned by the Tribunal in the case of Super Chemicals (supra). They empha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of clearance of Spent Sulphuric Acid, equal to the amount of Modvat credit availed of by them. The second proposition of the Revenue is that if Sulphuric Acid and Spent Sulphuric Acid are not same products, it is a waste product, which should suffer duty under Heading 28.07 in view of the provisions of Rule 57F(4) of Central Excise Rules. Revenue has tried to distinguish the case of Aureola Chemicals (supra) by submitting that the Tribunal came to the conclusion that Sulphuric Acid is not a manufactured product, as it was unused or unreacted Sulphuric Acid. Secondly, while deciding the Aureola Chemical's case, the decision in the case of DCW Ltd. - 1996 (81) E.L.T. 381 was not considered by the Tribunal. In DCW case it was held that Spent Sulphuric Acid finds a regular market with industrial users and as such it is goods and would not fall under the category of rubbish material thrown in the process of manufacture. Further, even in Super Chemical Industries case, supra, the Tribunal only observed that one of the considerations for holding Spent Sulphuric Acid as excisable goods was the appellants' agreeing to pay duty on it. It does not at all convey that DCW decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is a metal of as good a quality as the prime metal from which it arises." In view of these facts and nature of dross and skimmings, the Supreme Court held that dross and skimmings are not goods. Nowhere the Supreme Court in the said judgment has held that by-product will not be considered as goods which cannot be subjected to levy of excise. The Tribunal also in Nirma Chemical Works case, supra, observed that spent sulphuric acid "is produced as a by-product in the form of waste/residue during the process of manufacture of Nitrobenzene and acid slury/detergent powder by sulphonation. It is also sold and find use in the manufacture of fertilizers. Therefore, it cannot be said that it is not a manufactured product or goods." Once it is a by-product in the form of waste/residue it has to suffer duty of excise. Accordingly the duty is leviable on spent sulphuric acid. 9. The next question to be considered is regarding classification of spent sulphuric acid. The rival Headings are 28.07 and 38.23 which read as under :- 28.07 2807.00 sulphuric acid and anhydrides thereof; Oleum. 38.23 3823.00 Prepared binders for foundry moulds or cores; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue that sulphuric acid has been used in or in relation to manufacture of the final goods. As the sulphuric acid has been put to use, the manufacturers are eligible to avail of Modvat credit of the duty paid on the entire quantity of sulphuric acid so used. This was the view of the Allahabad High Court in the case of Varuna Sulphonators Pvt. Ltd. - 1993 (68) E.L.T. 42. It was held by the High Court as under :- "When the entire quantity of sulphuric acid was subjected to the manufacturing process, it cannot be said that the same was not used for the manufacture of final product, simply because due to water being added, a layer is created which separates the spent sulphuric 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 quo 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 the final product." 12. The refere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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