Spent acid classification as dutiable goods brings clearances into exemption-limit computation, with Modvat credit considered in duty calculation.

Spent acid was treated as a dutiable product classifiable under TH 28.07, so its clearances had to be included in aggregate clearances for computing eligibility under Notification No. 175/86. The Tribunal followed its Larger Bench ruling on classification and upheld the Revenue's position on inclusion for exemption-limit purposes. For duty computation, the adjudicating authority was required to take eligible Modvat credit on inputs used in manufacturing the final products, including spent acid, into account while working out the exact liability.

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Issues: (i) Whether spent acid was classifiable as a dutiable product under TH 28.07 and includible in the aggregate clearances for the purposes of Notification No. 175/86. (ii) Whether Modvat credit on inputs used in manufacture of the final products, including spent acid, should be considered while determining the duty liability.

Issue (i): Whether spent acid was classifiable as a dutiable product under TH 28.07 and includible in the aggregate clearances for the purposes of Notification No. 175/86.

Analysis: The parties accepted that the controversy stood covered by the Tribunal's Larger Bench decision holding spent acid to be liable to duty under TH 28.07. Once so classified, the clearances of spent acid form part of the clearances relevant to the computation under Notification No. 175/86.

Conclusion: The issue is decided against the assessee and in favour of Revenue.

Issue (ii): Whether Modvat credit on inputs used in manufacture of the final products, including spent acid, should be considered while determining the duty liability.

Analysis: Since duty liability was being worked out on the basis of the clarified classification and aggregate clearances, the remaining contention was that the adjudicating authority should account for Modvat credit on eligible inputs while quantifying duty. This was accepted as a matter to be examined in the duty computation.

Conclusion: The adjudicating authority was directed to consider Modvat credit while determining the exact duty liability.

Final Conclusion: The classification of spent acid as dutiable and its inclusion in aggregate clearances was upheld, while the computation of duty was left to be worked out by the adjudicating authority with due consideration of Modvat credit.

Ratio Decidendi: Once a product is held dutiable and classifiable under the relevant tariff heading, its clearances are to be included for exemption-limit computation, and eligible input credit must be taken into account in quantifying the resultant duty liability.

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