Spent sulphuric acid remains classifiable as sulphuric acid, is dutiable, and does not block full Modvat credit.

Spent sulphuric acid is treated as a chemically defined sulphuric acid solution classifiable under Heading 28.07, because dilution or emergence as a by-product does not move it to Heading 38.23. It is also dutiable when it arises in the manufacturing process and is capable of sale or industrial use. Separately, Modvat credit remains admissible on the entire quantity of duty-paid sulphuric acid used in manufacture, since the scheme requires use in the process and not full physical assimilation in the final product; the credit entitlement is independent of the by-product's dutiability.

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Issues: (i) Whether spent sulphuric acid is merely sulphuric acid in diluted form classifiable under Heading 28.07 or a distinct product classifiable under Heading 38.23; (ii) whether duty is leviable on spent sulphuric acid arising in the manufacturing process; (iii) whether Modvat credit on the entire quantity of sulphuric acid used in manufacture is admissible.

Issue (i): Whether spent sulphuric acid is merely sulphuric acid in diluted form classifiable under Heading 28.07 or a distinct product classifiable under Heading 38.23

Analysis: Chapter 28 applies to separate chemically defined compounds, whether or not containing impurities or dissolved in water, and the tariff heading for sulphuric acid is not confined to any particular concentration. The product in question remains a chemically defined sulphuric acid solution even though its concentration is lower than commercial sulphuric acid. Chapter 38 is excluded where the product is a separate chemically defined compound.

Conclusion: Spent sulphuric acid is classifiable under Heading 28.07 and not under Heading 38.23.

Issue (ii): Whether duty is leviable on spent sulphuric acid arising in the manufacturing process

Analysis: The product arises as a by-product or waste/residue in the course of manufacture and is capable of sale and use in industry. Once a by-product emerges in the manufacturing process, it cannot be treated as something not arising from manufacture. The deeming and clearance provisions applicable to waste do not exempt it from duty where the product is otherwise excisable.

Conclusion: Duty is leviable on spent sulphuric acid.

Issue (iii): Whether Modvat credit on the entire quantity of sulphuric acid used in manufacture is admissible

Analysis: The scheme requires use of the duty-paid input in manufacture, not complete physical assimilation in the final product. When the entire quantity of sulphuric acid is subjected to the manufacturing process, credit cannot be denied merely because a spent residue emerges. The entitlement to credit is independent of the dutiability of the by-product.

Conclusion: Modvat credit on the entire quantity of sulphuric acid used in manufacture is admissible.

Final Conclusion: The reference was answered by holding that spent sulphuric acid is classifiable as sulphuric acid under Heading 28.07 and is dutiable, while credit on the duty paid input sulphuric acid remains available in full.

Ratio Decidendi: A chemically defined product does not cease to fall under its tariff heading merely because it emerges in diluted form or as a by-product, and Modvat credit is admissible where the duty-paid input is used in manufacture even if the input is not fully assimilated in the final product.

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