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Issues: Whether Rule 6 of the Cenvat Credit Rules applied so as to require reversal of 8% of the price of spent sulphuric acid, when the product emerged only as a by-product and was transferred to a sister unit for captive use without sale.
Analysis: The spent sulphuric acid emerged only as a by-product in the manufacture of chlorine and was cleared to a sister unit for use in the manufacture of fertilizer under Chapter X procedure against CT2 certificate. The transfer was not a sale to a third party. The rule requiring reversal was treated as pari materia with Rule 57CC of the erstwhile Central Excise Rules, 1944, and the Tribunal relied on earlier decisions holding that where goods are shifted to another unit of the same assessee for captive consumption, no sale is involved and reversal is not required. The cited authorities also supported the view that a by-product or residue does not attract the reversal obligation in the absence of a taxable final product sale.
Conclusion: Rule 6 did not apply to the transfer of the by-product to the sister unit, and the demand for 8% reversal was unsustainable.
Ratio Decidendi: A by-product transferred to another unit of the same assessee for captive consumption, without sale, does not attract reversal under Rule 6 where the rule is applied pari materia with the earlier Modvat reversal provision.
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