COLLECTOR OF C. EX. Vs. KETI CHEMICALS

JUDGEMENT

(1.) THESE three appeals have been referred to this Larger Bench vide Misc. Order No. 37/99 -C on the following points : -

(2.) THE facts leading to the above reference are, in brief, that the appellants were engaged in the manufacture of Acid Slury and Detergent Powder and one of the raw materials used by them is Sulphuric Acid classifiable under sub -heading 2807.00 of the Schedule to the Central Excise Tariff Act. They have opted for availing of the Modvat credit of the duty paid on the inputs under Rule 57A of the Central Excise Rules. During the process of manufacture, the LAB is Sulphonated by a strong Sulphuric Acid which result in the manufacture of Acid Slury which in turn is used in the manufacture of Detergent Powder. In this process of manufacture, Spent Sulphuric Acid is also obtained. The Collector (Appeals) under the order dated 31 -12 -1990 held that Spent Sulphuric Acid cannot be regarded as Sulphuric Acid as it contains a much lower percentage of H2SO4 i.e. 40 to 60% whereas Sulphuric Acid must contain H2SO4 between 77 to 100%; the Modvat credit is not to be reversed in respect of Spent Sulphuric Acid since the input Sulphuric Acid is not cleared as such from the factory of the appellants; that Spent Sulphuric Acid emerges only as by -product/waste during the manufacture of Acid Slury and as per the provisions of Rule 57D of the Central Excise Rules, Modvat credit cannot be denied simply on the ground that Spent Sulphuric Acid contains certain percentage of Sulphuric Acid in diluted form. The Collector (Appeals) also held that the Spent Sulphuric Acid is a chemical compound which is an excisable commodity classifiable under Heading 38.23 of the Central Excise Tariff chargeable to duty at appropriate rate read with exemption notification, if any.

(3.) LEADING the arguments on behalf of the Revenue, Shri K. Srivastava, learned SDR, and Shri Tilak, learned DR, submitted that Spent Sulphuric Acid is Sulphuric Acid in diluted form and falls under Heading 28.07 of the Central Excise Tariff; that as per test report the product contains 51 -60% Sulphuric Acid and as such there is a predominance of Sulphuric Acid in the product; that by virtue of Note l(a) and (b) to Chapter 28 of the CETA, Sulphuric Acid with impurities or dissolved in water would be covered under Chapter 28 of the Tariff. He further submitted that as per Note l(a) to Chapter 38, separate chemically defined elements or compounds are not covered under Chapter 38; that separate chemical elements and separate chemical compounds are covered by Chapter 28 of the Tariff. He relied upon the decision in the case of Commissioner of Sales Tax v. Agarwal and Co. - 1983 (12) E.L.T. 116 (Bom.) in which it was held that in a fiscal legislation a general term used for describing any commodity covers that commodity in all its forms and varieties. He further mentioned that in Mangalore Chemical and Fertilizer Ltd. v. C.C.E. - 1998 (98) E.L.T. 490, it was held that Carbon Dioxide is classifiable under Item 14H of erstwhile Central Excise Tariff, irrespective of percentage of purity. He also relied upon the decision in the case of C.C.E. v. Aureola Chemicals - 1998 (103) E.L.T. 105 (Tribunal) in which it was held that the process as a result of which Spent Sulphuric Acid arises is a process not amounting to manufacture and contended that no new product emerges as a result of manufacture and Spent Sulphuric Acid is, therefore, nothing but Sulphuric Acid in diluted form. He emphasised that Heading 28.07 refers to Sulphuric Acid and Anhydrides thereof; Oleum. It does not exclude any Sulphuric Acid which is available in different concentrates. In support of his contention reliance was placed by him on the decision of the Supreme Court in the case of Indian Tool Manufacturer v. Asstt. Collector of Central Excise - 1994 (74) E.L.T. 12 (S.C.) wherein it was held that "if there is a general heading for the purpose of levy of excise duty, then every variety of goods falling under that general heading will have to be tested under that heading." The first proposition from the Revenue, therefore, was that clearance of Spent Sulphuric Acid amounts to clearance of inputs as such in terms of Rule 57F(1)(ii) of the Central Excise Rules, and therefore, is chargeable to Central Excise duty which should not be less than the amount of credit allowed in respect of such input.