CENVAT credit reversal does not apply to spent sulphuric acid emerging as a by-product in manufacture.

Rule 6 of the Cenvat Credit Rules, 2004 applies only when an assessee manufactures both dutiable final products and exempted goods. Where spent sulphuric acid emerges compulsorily as a by-product or waste in the manufacture of detergent products, it is not a separate manufactured final product for Rule 6 purposes. The amendment to the definition of excisable goods did not dispense with the threshold requirement that the process amount to manufacture under Section 2(f) of the Central Excise Act, 1944. Rule 6 was therefore inapplicable, and the demand for reversal of CENVAT credit and consequential duty could not be sustained.

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Issues: Whether Rule 6 of the Cenvat Credit Rules, 2004 applied to spent sulphuric acid arising as a by-product in the manufacture of detergent products, so as to require reversal of CENVAT credit and payment under Rule 6(3).

Analysis: The liability under Rule 6 arises only where an assessee manufactures both dutiable final products and exempted goods. Where the alleged exempted commodity is merely a by-product or waste emerging compulsorily in the course of manufacture, it is not a separate manufactured final product for the purpose of Rule 6. The amendment to the definition of excisable goods did not alter the basic requirement that the process must first qualify as manufacture under Section 2(f) of the Central Excise Act, 1944. In view of the settled distinction between final products and by-products, spent sulphuric acid obtained in the manufacturing process could not be treated as an exempted manufactured product attracting Rule 6.

Conclusion: Rule 6 of the Cenvat Credit Rules, 2004 was inapplicable and the demand for reversal of credit and consequential duty could not be sustained.

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