ORDER
G.R. Sharma, Member (T)
1. By the present appeal, the appellant has assailed the order of the learned Additional Collector. The ld. Additional Collector in his order had held that the demand raised on the party for the excess Modvat credit alleged to have been taken by the party is therefore, not tenable and had further held that as regards the dutiability of spent sulphuric acid it is observed that the same is used for the manufacture of fertilizer, chemicals etc. It has a commercial value and is marketable. In this view of the matter, spent sulphuric acid is to be charged to duty appropriately. The learned Additional Collector also held that having regard to the facts and circumstances of the case, the demand raised against the party is dropped.
2. The facts of the case, in brief, are that the respondents herein are engaged in the manufacture of acid slurry under sub-heading 3402.90; that the respondents herein have been availing modvat credit under Rule 57A of the Central Excise Rules, 1944 on sulphuric acid falling under sub-heading 2807.00; that the respondents had been mixing Linear Alkyl Benzene (LAB), sulphuric acid/oleum and water in measured quantities in sulphonator and obtaining acid slurry and spent sulphuric acid. The spent sulphuric acid obtained during the process of manufacture of acid slurry was being sold by them to their customers; that the respondents had been paying duty on clearance of the spent sulphuric acid; that the concentration of spent sulphuric acid obtained during the course of manufacture of acid slurry was stated to be about 70% approx.; that the spent sulphuric acid in the diluted form is used in the manufacture of fertilizers, chemicals etc. The Department was of the view that the respondents herein should have availed Modvat credit on sulphuric acid actually used in the manufacture of acid slurry and therefore, the respondents should not have retained the credit on sulphuric acid not used in the manufacture of acid slurry. It was alleged that since the respondents did not reverse the credit of duty taken on sulphuric acid used in the manufacture of spent sulphuric acid. A show-cause notice was issued to the respondents herein calling upon them to explain as to why Modvat credit of Rs. 2,99,638.55 should not be recovered from them under Rule 57-I read with the proviso to Section 11A of the CESA, 1944 and also why penalty should not be imposed on them under Rule 173Q.
3. Shri J. Singh, the learned JDR appearing for the appellants submits that spent sulphuric acid obtained during the process of manufacture of acid slurry remains as sulphuric acid, nevertheless with impurities; that Chapter Note l(b) to Chapter 28 states that even sulphuric acid of less than 77% concentration would be classified under CH-2807. This spent sulphuric acid falling under CH-2807 was not a refuse, waste or by-product; that that portion of sulphuric acid contained in the spent sulphuric acid cannot be said to have been used in the manufacture of acid slurry and therefore, Modvat credit on that portion of sulphuric acid stated to be used in the manufacture of acid slurry was wrongly taken by the party. The learned DR submitted that since that portion of sulphuric acid cannot be termed as an input used in the manufacture of acid slurry, therefore, the lower authorities have rightly denied them the credit of duty on that portion of sulphuric acid used in the manufacture of spent sulphuric acid.
5. Heard the submissions of the learned DR and perused the case-records. We proceed to decide the case on merits. We observe that the learned Addl. Collector had relied on the judgment of the Apex Court in the case of M/s. Swadeshi Polytex v. C.C.E. reported in 1989 (44) E.L.T. 794 wherein the Apex Court had held that set-off of duty was not deniable if non-excisable or fully exempted by-products, materials waste or residue emerged at intermediate stage unless excess use of input is proved. It was also held that set-off of duty was not deniable nor reducible on use of duty-paid glycol and DMT in the manufacture of polyester fibre (man-made) even if methanol and other waste were generated during process of manufacture. We also observe that it was clarified in the case of proforma credit under Rule 56A. We find that that in the instant case, sulphuric acid is one of the inputs in the manufacture of acid slurry. We also observe that in the process of manufacture of acid slurry not only the acid slurry as a final product comes into existence but spent sulphuric acid comes into existence as a by-product. We observe that the Apex Court no doubt was considering the matter in respect of set-off of duty under Rule 56A but the provision of credit under Rule 57A are more liberal than those of Rule 56A and therefore, the ratio of the decision of the Apex Court can be equally applied to the situation covered by Rule 57A of the Central Excise Rules, 1944. In the instant case, sulphuric acid was an input and therefore, modvat credit on sulphuric acid was rightly taken under Rule 57A. Since credit of duty on sulphuric acid was lawfully available and taken by the respondents, the question of denial of this credit or recovery of the amount utilized out of this credit is not sustainable simply because the spent sulphuric acid is generated as a by-product in the process of manufacture of acid slurry. We also observe that the Hon’ble Allahabad High Court in the case of Varuna Sulphonators Pvt. Ltd. v. Union of India and Others reported in 1993 (68) E.L.T. 42 (All.) had held that Modvat scheme does not emphasise that during the manufacturing process the entire duty paid input must be actually consumed, but the emphasis is on the use of duty paid input in the manufacture of final product. The words ‘used’ and ‘consumed’ are not identical and synonymous and have not been defined in the Rules and in the Central Excises and Salt Act, 1944. The word ‘used’ does not indicate that a thing which is liquid can be said to be used only when it is spent up to the last drop, the word ‘consumed’ may be used in the sense that a thing which is consumed must be finished, exhausted or devoured in full, but that is not the sense of the word ‘used’. To qualify for Modvat credit, what is required is that a given input should be used in the manufacture of final product. There is nothing to show that credit of duty will not be allowed if a manufacturer is not able to prove that the required input has been exhausted so as not to leave even a drop of it behind. In the light of aforesaid observation, Modvat credit allowed on the duty paid input during the period May, 1991 to October, 1991 cannot be recovered under Rule 57-I of the rules inasmuch as there was no error in allowing the same. We observe that in this decision, the Hon’ble Allahabad High Court held that sulphuric acid was used in the manufacture of acid slurry and spent sulphuric acid was produced as a by-product. We also observe that for coming to the above decision, the Hon’ble Allahabad High Court had relied on the decision of the Apex Court in the case of M/s. Swadeshi Polytex Ltd. v. CCE. We find that the ratio of the decisions cited supra fully covers the facts and circumstances of the present case. In this view of the matter, we do not see any legal infirmity in the order of the Additional Collector. Accordingly, the impugned order is upheld and the appeal is rejected.