2004 (1) TMI 283

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....ppellants manufacture zinc/lead in their Smelting Unit; that for the manufacture of zinc and lead, they use LDO in the smelting operations; that by the process of roasting the Ore concentrates, Sulphur Di-oxide, one of the impurities is generated; that this Sulphur Di-oxide cannot be vented in the air due to its hazardous nature and Pollution Control norms; that consequently, Sulphur Di-oxide is converted to Sulphuric Acid in the Sulphuric Acid Plant; that the Commissioner, under the impugned order, has confirmed the demand and imposed a penalty on the ground that LDO has been used in the manufacture of exempted product and that when Sulphuric Acid is removed without payment of duty, credit on inputs proportionate to its use in the manufact....

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....f duty, the provisions of Rule 57C, which provides that the Modvat Credit will not be available if the inputs are used in or in relation to the product will be attracted. He relied upon the decision in the case of Commissioner of Sales-tax v. Bharat Petroleum Corporation Ltd., 1995 (77) E.L.T. 790 (S.C.), wherein it has been held by the Supreme Court that where a subsidiary product is turned out regularly and continuously in the course of a manufacturing business and is also sold regularly from time to time, an intention can be attributed to the manufacturer to manufacture and sell not merely the main item manufactured but also the subsidiary products. Reliance has also been placed on the decision in the case of C.C.E. v. India Gelatine and....

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....rom the provisions of Rule 57D(1) of the Rules that credit shall not be denied on the ground that part of the inputs is contained in a by-product. It is also not disputed that by-product in the present matter, namely, Sulphur Di-oxide gas is taken to Sulphuric Acid Plant for converting the same into Sulphuric Acid. We agree with the learned SDR that Sulphuric Acid has been obtained by the appellants as a conscious act. However, it cannot be claimed by the Revenue that any part of the inputs i.e. LDO has gone into manufacture of Sulphuric Acid. For the purpose of applying the provisions of Rule 57C of the Central Excise Rules, 1944, it is pre-requisite that the inputs are used in the manufacture of products, which are exempted from the whole....