By-product sulphuric acid not subject to Rule 6(3) where it arose as a technical necessity in zinc and lead manufacture.

Rule 6(3) of the Cenvat Credit Rules, 2004 was considered in relation to sulphuric acid generated as a by-product during the manufacture of dutiable zinc and lead. The Tribunal followed the Supreme Court's earlier view on identical facts under Rule 57CC, holding that the provision was not attracted where sulphuric acid arose only as a technical necessity in the manufacturing process. It also accepted the verification finding that no input services were used directly or commonly for producing sulphuric acid, so the attempted distinction between common inputs and common input services failed. The percentage-based demand on the by-product's value was therefore set aside.

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Issues: Whether Rule 6(3) of the Cenvat Credit Rules, 2004 applied to sulphuric acid emerging as a by-product during manufacture of dutiable zinc and lead, so as to require payment of a percentage of its value.

Analysis: The dispute turned on whether the by-product sulphuric acid could be treated as a final product attracting Rule 6. The Tribunal noted that the Supreme Court had already examined identical facts in the appellant's own case under the parallel provision, Rule 57CC of the Central Excise Rules, 1944, and had held that the provision was not attracted where sulphuric acid arose only as a technical necessity in the course of manufacture of zinc and lead. The Tribunal further noted that the factual verification report showed no input services were availed directly or commonly for generation of sulphuric acid, and therefore the attempted distinction between common inputs and common input services was unsustainable.

Conclusion: Rule 6(3) was held not applicable to the sulphuric acid by-product, and the demand based on a percentage of its value was set aside in favour of the assessee.

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