RAMA INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The issue involved in this Appeal filed by M/s. Rama Industries Ltd. is whether they are liable to pay an amount equal to 8% of the price of exempted product Calphor emerging during the process of manufacture of their final produce gelatin.

(2.) Shri Joy Kumar, Learned Advocate, that the Appellants are primarily engaged in the manufacture of gelatin; that during the course of manufacture of gelatin at the very first stage, a mother liquor emerges as a waste product while washing bones with caustic soda, zinc flux and HCL; that by treating said mother liquor with lime, the by -product namely Calphor (di calcium phosphate) emerges which attracts nil rate of duty mentioned in the Schedule to the Central Excise Tariff itself (Heading No. 23.02); that the Deputy Commissioner under Order -in -Original No. 94/DC/Offence/2002 dated 31.12.01 has confirmed the demand under Rule 57 CC/57 AD of the Central Excise Rules, 1944 and imposed penalty on the ground that the inputs have been used in the manufacture of both dutiable final products as well as exempted product; that the Appeal filed by them has also been rejected by the Commissioner (Appeals) under the impugned order. Learned Advocate, further, submitted that the jurisdictional Superintendent of Central Excise has accepted their product Calphor as by -product which is evident from the registration Certificate issued to them; that since it is admitted fact that Calphor is a by -product, they are entitled to the benefit of MODVAT credit on inputs in view of the provisions of Rule 57D of the Central Excise Rules and CENVAT Credit with effect from 1.4.2000 in view of the clarification issued by the Central Government vide letter F.No. B -4/7/2000 -TRU dated 3.4.2000 ; that it has been clarified in the said letter that CENVAT Credit shall be admissible in respect of the amount of inputs contained in any of the waste, refuse or by -product since the basis idea is that CENVAT Credit is admissible so long as inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly. Learned Advocate also contended that it has been held by the Appellate Tribunal in a number of cases that the provisions of Rule 57 CC would not apply to by -product which is covered under Rule 57D. Reliance has been placed on the decision in the case of Hi Tech Carbon Vs. CCE Allahabad[2003 (56) RLT 378].

(3.) Countering the arguments, Shri Kumar Santosh, learned Senior Departmental Representative, submitted that the impugned product calphor is not a by -product emerging in the process of manufacture of gelatin; that as the process of manufacture given by the Appellants themselves, the mother liquor is treated with lime which results into emergence of calphor; that thus calphor is manufactured by the appellants as a conscious act and, therefore, it cannot be termed as a by -product merely on the ground that in the Registration Certificate issued by the Superintendent the product is mentioned as by -product; that it has been held by the Supreme Court in the case of Commissioner of Sales Tax, Bombay vs. Bharat Petroleum Corpn. Ltd. [1995 (77) ELT 790 (SC)] that where the subsidiary product is turned out regularly and continuously in the course of manufacturing business and is also sold regularly from time to time, and intention can be attributed to the manufacturer to manufacture and sell not merely the main item manufactured but also the subsidiary products; that similar views have been expressed by the Appellate Tribunal in the case of CCE Vadodara Vs. India Gelatin the Chemical 1996 (88) ELT 425 (Tri) wherein it has been held that the frequency and regular intervals at which such sludge and dust was cleared does suggest that these products were not mere waste but were subsidiary products turned out regularly and continuously during the course of manufacture and were also sold regularly; that regularity and frequency also suggest that this sludge and dust were known to the market as distinct entities and were purchased by different buyers and therefore, the Collector was clearly wrong in holding that the impugned goods were not goods with a new name, character or use. The Learned Senior Departmental Representative, therefore, contended that the Appellants were manufacturing both the dutiable as well as exempted products and therefore in terms of provisions of Rule 57 CC of the Central Excise Rules, they were required to pay the amount equal to 8% of the price of the exempted products.