Input credit on by-products: spent sulphuric acid did not justify reversal where manufacture produced exempt and duty-paid clearances.

Credit of duty on sulphuric acid could not be denied under Rule 57C where spent sulphuric acid emerged only as a by-product in manufacture. The court treated the spent sulphuric acid as a by-product, not the final product, and held that its emergence did not alter the character of the manufacturing inputs. Rule 57D protected credit even when input content was present in waste, refuse or by-products, regardless of whether the by-product was exempt or cleared at nil duty. As the spent sulphuric acid was cleared partly under exemption and partly on duty, reversal of credit was not justified and the assessee's credit claim was upheld.

---

---

Issues: Whether credit of duty on sulphuric acid used in manufacture could be denied under Rule 57C when the spent sulphuric acid emerged as a by-product and was cleared partly on payment of duty and partly under exemption.

Analysis: The dispute turned on whether spent sulphuric acid was a final product or a by-product. The binding authority recognised sulphuric acid as a by-product and held that the emergence of such a product in the course of manufacture does not convert it into the final product. On that basis, invocation of Rule 57C to deny credit was not justified. Rule 57D further protected credit where part of the inputs is contained in waste, refuse or a by-product arising during manufacture, irrespective of whether such by-product is exempt or liable to nil rate of duty. As part of the spent sulphuric acid was cleared under exemption and part on duty, the credit could not be reversed.

Conclusion: The credit was admissible and could not be denied or reversed; the issue was decided in favour of the assessee.

---