Tribunal grants exemption under Notification No. 67/95-CE for oxygen used in copper purification.

The Tribunal held that the appellants were eligible for exemption under Notification No. 67/95-CE as the oxygen produced in their plant was solely used for the purification of copper concentrate and not in the production of sulphuric acid. The Tribunal also determined that sulphuric acid was a by-product, not a final product, in line with the Supreme Court's decision. Consequently, the appellants were found to comply with Rule 6 of the CENVAT Credit Rules and were granted eligibility for Modvat/Cenvat credit, leading to the setting aside of the duty demand and penalty imposed by the adjudicating authority.

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Issues Involved:
1. Excisability and marketability of oxygen gas captively consumed.
2. Applicability of Exemption Notification No. 67/95-CE for oxygen gas used in the manufacture of exempted goods.
3. Compliance with Rule 6 of the CENVAT Credit Rules, 2001 and 2002.
4. Classification of Sulphuric Acid as a by-product or final product.
5. Eligibility for Modvat/Cenvat credit.

Issue-wise Detailed Analysis:

1. Excisability and Marketability of Oxygen Gas Captively Consumed:
The appellants manufactured oxygen gas in their plant and used it captively in the production of copper anode. The adjudicating authority confirmed the demand for excise duty on the oxygen consumed captively, asserting its marketability. The appellants argued that the oxygen produced was not marketed and was used solely for the purification of copper concentrate. They contended that further purification and infrastructure would be necessary to make the oxygen marketable, which they did not possess.

2. Applicability of Exemption Notification No. 67/95-CE:
The appellants claimed exemption under Notification No. 67/95-CE for the oxygen gas used in the manufacture of copper anode, a dutiable final product. They argued that the oxygen was not used in the manufacture of sulphuric acid, an exempted product, and hence, they were eligible for the exemption. The adjudicating authority denied the exemption, stating that sulphuric acid, cleared at a nil rate, was a final product, and since oxygen was used in its manufacture, the exemption was not applicable.

3. Compliance with Rule 6 of the CENVAT Credit Rules, 2001 and 2002:
The appellants contended that they complied with Rule 6 of the CENVAT Credit Rules, which required maintaining separate accounts for inputs used in the manufacture of dutiable and exempted goods. They argued that oxygen was used only in the manufacture of copper anode and not in the production of sulphuric acid. The adjudicating authority, however, held that since sulphuric acid was an exempted final product, the appellants did not comply with the rule.

4. Classification of Sulphuric Acid as a By-Product or Final Product:
The appellants referred to the Supreme Court's decision in the case of UOI Vs Hindustan Zinc Ltd., which held that sulphuric acid, emerging as a technological necessity, was a by-product and not a final product. They argued that sulphuric acid produced during the purification of copper concentrate was a by-product and not a final product, thus making them eligible for the exemption under Notification No. 67/95-CE.

5. Eligibility for Modvat/Cenvat Credit:
The appellants claimed Modvat/Cenvat credit for the inputs used in the manufacture of final products, arguing that the oxygen used in the production of copper anode was eligible for credit. The adjudicating authority, however, demanded duty on the oxygen used in the manufacture of sulphuric acid, asserting that it was an exempted final product.

Judgment Analysis:
The Tribunal carefully considered the submissions and the manufacturing process. It found that oxygen was an essential input for the production of copper anode and was not used in the manufacture of sulphuric acid. The Tribunal held that the oxygen produced in the appellants' plant was used exclusively for the purification of copper concentrate and not in the production of sulphuric acid. Therefore, the appellants were eligible for the exemption under Notification No. 67/95-CE.

The Tribunal also referred to the Supreme Court's decision in UOI Vs Hindustan Zinc Ltd., which supported the appellants' claim that sulphuric acid was a by-product. The Tribunal concluded that the appellants complied with Rule 6 of the CENVAT Credit Rules and were eligible for Modvat/Cenvat credit. Consequently, the duty demand and penalty imposed by the adjudicating authority were set aside, and the appeal was allowed.

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