2023 (3) TMI 1471

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.... duty under Notfn. No.4/2006-CE dated 1.3.2006, as amended, and duty reversed/paid by them on such inputs was correct and the refund claims rejected by the respondent was correct and in order. In view of the above, both the impugned orders-in-original are upheld and the appeals are rejected." 2.1 Appellant is manufacturer of dutiable products viz. motor spirit, high speed diesel, liquid petroleum gas, benzene, dimineralised water, filtered sea water etc. During the course of manufacture of these products, LPG which is a by-product emerges and cleared using exemption and supplied through PDS system treating the said goods as exempted goods. 2.2 Revenue issued show cause notices periodically from time to time seeking reversal of the credit used in respect of the exempted goods as per Rule 6 of Cenvat Credit Rules. 2.3 These show cause notices have been adjudicated by the orders-in-original and the appeals filed by the appellant have been rejected by the impugned order. Aggrieved appellant has filed these appeals. 2.4 The miscellaneous applications filed by the appellant for taking additional grounds on record are allowed. 3.1 We have heard Shri Vipin Kumar Jai....

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....f the inputs namely Hydrochloric acid was used in the manufacture of dutiable goods (Gelatin) as well as for manufacture of exempted goods Dicalcium Phosphate and the assessee was not maintaining separate account under rule 6(2) of CCR,2004. The Hon‟ble Gujarat High Court after examining the provision of Cenvat scheme and the argument that the assessee therein could not have manufactured Gelatin using a lesser quantity of Hydrochloric acid held that rule 6 (1) of the CCR itself would not come into play. The relevant observation of Hon'ble High Court is reproduced below:- "6. The undisputed facts of the case are that for the purpose of manufacture of Gelatin, cleared bone chips are charged to acidulation vats with the help of conveyors. Each vat is filled with pre-determined quantity of bone chips and then soaked with Hydrochloric Acid. The bones contain mineral matter like Phosphate Salts. The Hydrochloric Acid leaches out the phosphates forming Mono Calcium Phosphate. The phosphate solution commonly known as Mother Liquor is pumped out of the acidulation vats into precipitation tanks where lime solution is added which reacts with Mono Calcium Phosphate converting it....

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....he mere fact that a by-product emerges during the process would not bring the by-product within the ambit of Rule 6 of the Rules so as to call for maintaining separate accounts in respect of the same. When the entire quantity of input is used in the manufacture of Gelatin, the question of maintaining separate accounts or of paying a percentage of the total price of the exempted goods would not arise. In the peculiar facts of the present case, sub-rule (1) of Rule 6, itself would not come into play inasmuch the manufacturer does not deliberately use any quantity of the inputs, viz. Hydrochloric Acid for manufacturing Mother Liquor, the entire Hydrochloric Acid is used in the manufacture of Gelatin. Thus, when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input. ...................... 10. In the facts of the present case, it is not as if by using a smaller quantity of input Hydrochloric Acid, the respondent could have averted the emergence of Mother Liquor. In other words, in the technology utilized by the respondent for the ma....

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....nded to manufacture gelatin as the main product and exempted goods i.e. Dicalcium Phosphate generated unavoidably in the course of manufacture of gelatin same quantum of input and input services used for manufacture of gelatin. In the present case the entire quantity of input and input services was used for manufacture of dutiable products namely motor sprit (MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil etc. only because of generation of LPG the quantum of input and input services used for manufacture of motor sprit (MS), High Speed Diesel Oil, aviation Turbine fuel (ATF), Naphtha, Fuel oil etc. does not get reduced that same entire quantity of input and input services has been used in manufacture of dutiable goods even though the LPG is generated in the stream of entire manufacture process. The Cenvat credit of only such quantity of input and input services to be denied which is not used in the manufacture dutiable goods but in the present case there is no dispute that the entire quantity of input and input services has been used for manufacture of dutiable goods therefore even though the LPG arising in the course of manufacture only because of that i....

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....re of ethylene and propylene. The emergence of ethane and methane is, therefore, by itself is not a ground to deny the benefit of the exemption notification. ........................ 30. We have heard the learned counsel for the parties at length and perused the judgments cited at the Bar. The Tribunal's finding that the ethylene and propylene used as refrigerant has been used in or in relation to the manufacture of the same goods. The inevitable and automatic emergence of ethane and methane, therefore, by itself is no ground for denying the exemption contained in the notification. The Tribunal came to the categoric finding that the respondent could not have manufactured ethylene and propylene without manufacturing its byproducts ethane and methane. The Tribunal held that in any technology the emergence of ethane and methane was inevitable and hence while it is no doubt correct to say that the ethylene and propylene have been used in or in relation to the manufacture of ethane and methane, the identical quantity of the same goods has simultaneously been used in the manufacture of ethylene and propylene. The emergence of ethane and methane, therefore, cannot be a g....