Cenvat Credit Rule 6 does not apply to incidental by-products like spent sulphuric acid arising in manufacture.

Rule 6(3) of the Cenvat Credit Rules, 2004 was held inapplicable to spent sulphuric acid arising incidentally as a by-product during manufacture of the main product. The amended explanation to Rule 6(1) was construed as extending only to non-excisable goods cleared for construction from a factory, and not as enlarging Rule 6(3) to cover by-products produced without a separate manufacturing activity. As the spent sulphuric acid was not a final product attracting the rule, no reversal of credit or payment under Rule 6(3) was required, and the demand was set aside in favour of the assessee.

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Issues: Whether spent sulphuric acid emerging as a by-product during manufacture was liable to the requirements of Rule 6(3) of the Cenvat Credit Rules, 2004 after the amendment to Rule 6(1).

Analysis: The amended explanation to Rule 6(1) was construed as extending only to non-excisable goods cleared for construction from a factory and not as enlarging the scope of Rule 6(3) so as to cover by-products arising incidentally in the course of manufacture of the main product. The obligation under Rule 6 continued to attach to a manufacturer of final products, and the spent sulphuric acid, being a by-product released in the manufacturing process without a separate manufacturing activity, did not attract reversal or payment under Rule 6(3).

Conclusion: The demand under Rule 6(3) was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Rule 6(3) of the Cenvat Credit Rules, 2004 does not apply to a by-product incidentally arising in the course of manufacture of the main product merely because of the amendment to Rule 6(1), unless the goods fall within the rule as exempted goods or final products.

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