Modvat credit on sale of by-products

SC has ruled in a batch of appeals by the central govt that modvat/cenvat credit cannot be denied to manufacturers on the ground that in the course of production of the main goods, non-excisable by-products also come into being

The Supreme Court has ruled in a batch of appeals by the central government that modvat/cenvat credit cannot be denied to manufacturers on the ground that in the course of production of the main goods, non-excisable by-products also come into being. By-products cannot be equated with final products for excise purposes, the court stated while dismissing the appeals, led by Union of India vs Hindustan Zinc Ltd. In this case, zinc ore concentrate was processed to obtain zinc, but sulphuric acid came out as a by-product. It was sold to fertiliser companies. The revenue authorities issued showcause notice to the company for not keeping separate records for inputs used in the production of zinc and sulphuric acid. They demanded eight per cent duty on the sale price of the acid. Two other companies, Birla Copper and Rallis India Ltd also faced the same problem. Birla Copper was selling sulphuric acid obtained while processing copper ore. Rallis manufactured gelatine for making medicinal capsules from animal bones.

Some by-products, described as waste products, were cleared without payment of duty, inviting the show cause notices. The judgment stated that the assessee companies were entitled to the modvat/cenvat credit on inputs used in the manufacture of exempted final products. They were also not obliged to keep separate accounts of the inputs when there are dutiable and non-dutiable final products.

Objections in land acquisition

In land acquisition matters, the officer who hears objections from land owners must submit his report and another officer cannot do that job. It would render the report invalid, the Supreme Court emphasised in the case, Union of India vs Shiv Raj.

The Delhi High Court had quashed the land acquisition in certain areas in the capital in 1985. In this case, the grievance of some land holders was that their objections to the acquisition was heard by one officer but the report was submitted by another who succeeded the earlier one. Therefore, the report was prepared by the second officer without hearing them afresh. This contention was upheld by the high court. The central government appealed to the Supreme Court, without success. The court ruled that a person who hears the objections cannot pass on the responsibility of deciding them. The successor officer cannot rely on the records made by his predecessor. It would be destructive of the fundamental concept of granting hearing to aggrieved parties. "In case his successor decides the case without giving a fresh hearing, the order would stand vitiated having been passed in violation of the principles of natural justice," the judgment emphasied.