2004 (7) TMI 582 - AT - Central Excise

Chlorine Gas Modvat Credit Appeal Dismissed: Used in Manufacturing Process

The appeal by the Revenue regarding the reversal of Modvat credit on chlorine gas flamed out during the manufacturing process was dismissed. The court ... Cenvat/Modvat Issues:- Appeal regarding reversal of Modvat credit on chlorine gas flamed out during manufacturing process.Analysis:The case involved an appeal by the Revenue concerning the reversal of Modvat credit on chlorine gas that was flamed out during the manufacturing process. The appellant argued that since the input (chlorine gas) was not entirely used in the manufacture of the final product (Aluminium Chloride), Modvat credit should not be allowed on the flamed-out chlorine gas. The Assistant Commissioner initially confirmed the demand for Modvat credit repayment, but the CCE (Appeals) reversed this decision, leading to the Revenue's appeal.The appellant contended that chlorine gas, being a toxic chemical, should not escape into the atmosphere and provided an analyst certificate to support this claim. They also argued that the scrubber in the plant absorbed the chlorine gas in a caustic soda solution, preventing its escape. However, the Revenue maintained that the input must be entirely used in the manufacturing process to be eligible for Modvat credit, citing Rule 57A.Upon careful review of the record, it was observed that the Assistant Commissioner's findings lacked a proper basis and failed to address crucial points raised in defense. In contrast, the CCE (Appeals) correctly applied a previous decision's ratio, emphasizing that any input used for the effluent treatment system would qualify for Modvat credit. This decision was supported by the technical process involved in manufacturing Aluminium Chloride, as indicated in an Analyst report.Furthermore, the judgment referenced a recent decision that emphasized considering gases lost during the manufacturing process as used in or in relation to the manufacturing process, thereby supporting the eligibility for Modvat credit on lost gases. Given the technical process involved in manufacturing Aluminium Chloride and the absence of chlorine gas escape due to the scrubbing process, the appeal was dismissed, finding no merit in the Revenue's arguments.