Spent sulphuric acid is an excisable manufactured product; Modvat credit on input sulphuric acid cannot be recovered.

Spent sulphuric acid arising in the manufacture of acid slurry is treated as a manufactured excisable product and is classifiable under Heading 28.07 of the Central Excise Tariff Act, 1985, not Heading 38.23. On that basis, the manufacturer remains entitled to Modvat credit on the duty paid sulphuric acid used as input, and the department cannot recover an amount equal to that credit merely because the spent acid emerges during manufacture. The departmental challenge therefore fails on both classification and credit recovery.

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Issues: (i) Whether spent sulphuric acid arising in the manufacture of acid slurry is classifiable under Heading 28.07 of the Central Excise Tariff Act, 1985 or under Heading 38.23 of the Central Excise Tariff Act, 1985; (ii) Whether the department could recover duty equal to the Modvat credit taken on the sulphuric acid used as input.

Issue (i): Whether spent sulphuric acid arising in the manufacture of acid slurry is classifiable under Heading 28.07 of the Central Excise Tariff Act, 1985 or under Heading 38.23 of the Central Excise Tariff Act, 1985.

Analysis: The classification issue had not been raised in the notice and was treated by the lower appellate authority on an irrelevant basis. The Tribunal followed the Larger Bench ruling that spent sulphuric acid arising during manufacture is a manufactured product and falls under Heading 28.07.

Conclusion: The product was held classifiable under Heading 28.07 of the Central Excise Tariff Act, 1985.

Issue (ii): Whether the department could recover duty equal to the Modvat credit taken on the sulphuric acid used as input.

Analysis: Applying the Larger Bench ruling, the Tribunal held that once the spent sulphuric acid is treated as a manufactured product, the manufacturer remains entitled to the credit on duty paid on the sulphuric acid used in manufacture. On that footing, recovery of an amount equal to the Modvat credit was not permissible.

Conclusion: Recovery of duty equal to the Modvat credit was held impermissible.

Final Conclusion: The departmental challenge failed, and the order confirming classification under Heading 28.07 while negating recovery of Modvat credit was sustained.

Ratio Decidendi: Spent sulphuric acid generated in the course of manufacture is a manufactured excisable product classifiable under Heading 28.07, and the department cannot recover duty equal to Modvat credit on the input sulphuric acid merely because the spent acid emerges as a by-product.

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