Cenvat credit reversal on by-product clearances was not sustainable, and penalty for suppression was disapproved.

Rule 6 of the Cenvat Credit Rules did not require payment of 10% of transaction value on clearance of Spent Acid as a by-product without duty under Notification No. 6/02-C.E., because earlier Bombay High Court and Tribunal decisions supported the assessee's position. The Tribunal held that the demand was not sustainable on the facts, and rejected the Revenue's appeal. It also disapproved penalty action under Section 11AC, noting that repeated allegations of suppression were unwarranted where the assessee had followed an earlier decision in its own case and the issue remained arguable.

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Issues: Whether 10% of the transaction value was payable under Rule 6 of the Cenvat Credit Rules, 2004 on Spent Acid cleared as a by-product without payment of duty under Notification No. 6/02-C.E. dated 1-3-2002, and whether penalty under Section 11AC of the Central Excise Act, 1944 could be invoked in such circumstances.

Analysis: The dispute concerned a by-product arising in the manufacture of detergent products. The Tribunal noted that the issue had already been considered in earlier decisions, including a decision of the Bombay High Court and another decision of the Tribunal, both of which supported the assessee's stand. It was held that the demand for payment of 10% of transaction value under Rule 6 was not sustainable on the facts of the case. The Tribunal also observed that repeated invocation of suppression and penal action was unwarranted when the assessee was following an earlier decision in its own case and the issue was otherwise arguable.

Conclusion: The demand under Rule 6 was not payable on the clearances of Spent Acid, and the Revenue's appeal was rejected. The penalty invocation was also disapproved.

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