2004 (4) TMI 569 - AT - Central Excise

Tribunal Overturns Order: Assessee Not Liable for 8% of Sale Price; Clarifies Rules & Classification of By-Products.

The Tribunal set aside the Commissioner's order, allowing the assessee's appeals and dismissing the Revenue's appeals. It upheld that Rule 57D applies, ... Benefit of Cenvat/Modvat credit - non-excisable sulphur-di-oxide - manufacture of dutiable copper anodes - by-product/waste can be called as a final product or by-product - Whether the final product manufactured by the assessee was cleared on payment of duty - Whether copper concentrate could be called as a common input for the manufacture of dutiable copper anodes and the by-products, such as sulphuric acid and phosphoric acid - Applicability of Rule 57C vis-a-vis Notification No. 180/88 - HELD THAT:- As noted, in the present case, the final product manufactured by the assessee is copper anode which is cleared on payment of duty only and no part of copper anode is exempted. Sulphuric acid is a by-product manufactured out of the waste emerging during manufacture of the final product viz. copper anode. Phosphoric acid is manufactured by using sulphuric acid and even these by-products are also cleared on payment of duty except a small portion which is cleared as exempted by observing the conditions in Chapter X Procedure, etc. We have already held above that Rule 57D is applicable to the present case. We also note that even in accordance with Rule 57CC the manufacturer is required to maintain separate account only in a case where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as in any other final product (emphasis supplied by us) which is not chargeable to duty and in case he does not do so, he is required to pay an amount equal to 8% of the price payable on the goods. In the present case the assessee has cleared the final product viz. copper anode on payment of duty and no other final product emerged and sulphuric acid was a by-product as admitted by the revenue vide para 34 of the Order-in-Original and also in the grounds taken in the revenue appeals. Sulphur-di-oxide was also a by-product as admitted by the revenue vide para 36 of the Order-in-original and even the by-products such as sulphuric acid and phosphoric acid have also been cleared on payment of duty except a small portion cleared under Chapter X, etc., for manufacture of fertilisers. We are, therefore, of the considered opinion that there is no force in the contention of the Revenue that the assessee is required to pay 8% of sale price as noted above. In the case CCE v. Ashok Iron and Steel Fabricators [2002 (1) TMI 91 - CEGAT, NEW DELHI], it was held by the Larger Bench in this case that credit is not to be reversed when subsequently final product is exempted from duty, credit having been taken validly and its benefit being available to manufacturer without any limitation in time. This decision is relevant to the present case inasmuch as in the present case the final product is cleared on payment of duty and even the major portion of the by-products are cleared on payment of duty except a small portion, cleared as exempted product without payment of duty. In the case of Raghuvir (India) Ltd. v. CCE, Delhi, [2002 (1) TMI 92 - CEGAT, NEW DELHI], it was held that credit taken and utilised at a time when final product was dutiable, subsequent exemption of final product is not a reason for reversal of credit. We are also of the view that no reliance ought to have been placed by the Commissioner to Board Circular No. F No. 267/12/2001-CX, dated 28-1-2002. Through the said circular, Board had clarified that Rule 57D will not apply since sulphur-di-oxide has been subjected to further process to manufacture sulphuric acid and phosphoric acid both of which are dutiable. This Circular of the Board, in our view, cannot be applied to the facts of the present case for the following reasons: The Board circular is dated 28-1-2002 whereas the decision in the case of Aarti Drugs [2001 (4) TMI 146 - CEGAT, MUMBAI] was rendered as early as 18-4-2001. Board circular has not been taken into consideration the prevailing judicial ruling on the subject and the clarification is not based on any Court rulings. It is well settled that Circulars of Board cannot be relied upon and are not maintainable if the same are contrary to judicial decisions and precedence. The Hon’ble Madras High Court in the case of Pioneer Miyagi Chemicals v. CBEC,[1999 (11) TMI 79 - HIGH COURT OF JUDICATURE AT MADRAS] has held that Circulars issued by the Board which runs counter to judicial pronouncements are not valid and sustainable. The Hon’ble Delhi High Court of Delhi in the case of Kissan Chemicals v. Union of India,[1996 (5) TMI 91 - HIGH COURT OF DELHI AT DELHI] has held that Circular u/s 327B cannot be issued contrary to the decision of the Tribunal. The Tribunal in the case of CCE v. Bata India Limited,[2000 (3) TMI 819 - CEGAT, KOLKATA] have held that quasi judicial authorities are to decide matters independently and are statutorily protected from such instructions and can follow judgments of appellate forum instead of following such instructions. Conclusion: The order of the Commissioner was set aside, and the appeals of the assessee-appellants were allowed. The appeals filed by the Revenue were dismissed. The Tribunal upheld that Rule 57D applies, and the assessee is not required to pay 8% of the sale price under Rule 57CC. Issues Involved:1. Whether the final product manufactured by the assessee was cleared on payment of duty.2. Whether the by-products emerged in the process of manufacture of copper anode.3. Whether a product manufactured by using the by-product/waste can be called as a final product or by-product.4. Whether copper concentrate could be called as a common input for the manufacture of dutiable copper anodes and the by-products, such as sulphuric acid and phosphoric acid.5. Whether provisions of Rule 57D apply to the facts of the present case.6. Whether provisions of Rule 57D became inapplicable with the introduction of Rule 57AD and Rule 57CC.Judgment Summary:Issue 1: Final Product and Duty PaymentThe final product manufactured with the imported copper concentrate was copper anode, and this item was cleared on payment of duty.Issue 2: By-products in Manufacturing ProcessThe Department admitted that the sulphuric acid and phosphoric acid emerged during the process are by-products.Issue 3: Classification of ProductsSulphuric acid and phosphoric acid, being by-products, cannot be classified as final products. The Department's argument that these are final products during an integrated and continuous chemical process was rejected.Issue 4: Common InputCopper concentrate cannot be considered a common input for the final product (copper anode) and the by-products (sulphuric acid and phosphoric acid). The role of the copper concentrate ends with the manufacture of copper anode, and the by-products are manufactured using different inputs.Issue 5: Applicability of Rule 57DRule 57D applies to the present case. Credit of specified duty shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse, or by-product arising during the manufacture of the final product.Issue 6: Rule 57D vs. Rule 57AD and Rule 57CCThe right to avail of the benefit under Rule 57D has not been taken away with the introduction of Rule 57AD/Rule 57CC. The final product (copper anode) was cleared on payment of duty, and the by-products were also cleared on payment of duty except a small portion cleared under Chapter X Procedure.Conclusion:The order of the Commissioner was set aside, and the appeals of the assessee-appellants were allowed. The appeals filed by the Revenue were dismissed. The Tribunal upheld that Rule 57D applies, and the assessee is not required to pay 8% of the sale price under Rule 57CC.