HINDUSTAN ZINC LTD. Vs. C.C.E.

JUDGEMENT

(1.) The issue involved in this appeal, filed by M/s. Hindustan Zinc Ltd., is whether they are eligible to avail of the MODVAT Credit on the quantity of LDO which has been used in the manufacture of Sulfuric Acid which is exempted from payment of Central Excise duty.

(2.) Shri A.R. Madhav Rao, learned Advocate, submitted that the appellants 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, Sulfer Di -oxide one of the impurities is generated; that this Sulfur di -oxide cannot be vented in the air due to its hazardous nature and Pollution control norms; that consequently, Sulfure Di -oxide is converted to Sulfuric Acid in the Sulfuric 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 Sulfuric Acid is removed without payment of duty, credit on inputs proportionate to its use in the manufacture of Sulfuric Acid, should be reversed. The learned Advocate, further, submitted that admittedly the Sulfuric Acid is only a by -product and there are number of decisions wherein it has been held that credit cannot be denied when the inputs are used in the manufacture of final product and by -products are generated. He has relied upon the following decisions :

(3.) Countering the arguments, Sh. Kumar Santosh, Learned SDR, reiterated the findings as contained in the impugned order and emphasised that Sulfuric Acid is not being generated as a by -product as it is being manufactured in a separate section known as Sulfuric Acid Plant; that separate manufacturing processes are undertaken by the appellants for manufacturing the sulfuric Acid and as such it is a separate product; that as the Sulfuric Acid is exempted from payment of 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 vs. Bharat Petroleum Corporation Ltd., 1995 (77) ELT 790 (SC), 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 its manufactured but also the subsidiary products. Reliance has also been placed on the decision in the case of CCE vs India Gelatine And Chemical, 1996 (88) ELT 425 (T) wherein it has been held that frequency and regular intervals at which sludge and dust was cleared does suggest that there products were not mere waste but were subsidiary products turned out regularly and continuously during the course of manufacture and were sold regularly. He, therefore, contended that the MODVAT Credit is not allowable on the quantity of LDO which has gone into the manufacture of exempted product, namely, Sulfuric Acid.