Modvat credit on spent sulphuric acid remained admissible where the input was used in manufacture and emerged as a by-product.

Modvat credit on sulphuric acid could not be denied merely because the input emerged in the manufacturing process as spent sulphuric acid, a by-product or waste product. The applicable rule protected inputs used in manufacture, and the distinction between an input being used and being fully exhausted was material. Where the acid was used in the process and only the residue or emergent product remained, credit remained admissible. The Revenue's challenge therefore failed.

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Issues: Whether Modvat credit on sulphuric acid could be denied when the input emerged in the course of manufacture as spent sulphuric acid, treated as a by-product or waste product, under Rule 57D(1).

Analysis: Spent sulphuric acid was found to be obtained in the manufacturing process as a by-product and not as sulphuric acid in its original usable form. The rule governing Modvat credit protected inputs used in the manufacture of final products, and the distinction between input used and input fully consumed was material. Credit could not be disallowed merely because the input was not fully exhausted, so long as it was used in manufacture and the resulting residue or emergent product was a by-product.

Conclusion: The credit was admissible and the Revenue's challenge failed.

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