Collr. of C. Ex. Vs. Hindustan Aluminium Corporation - Court Judgment

Excerpt:
m/s hindustan aluminium corporation ltd., ranukot, distt. mirzapur (appellants) manufactures aluminium products. they brought in their factory hard pitch, soft and coaltar pitch after payment of duty on the same under t.i. 68 and use the same to manufacture cathodes and anodes which are used in the electrolytic pot cells and availed set off of duty paid on pitch while clearing aluminium and its manufactures as provided in notification no. 201/79 dated 4-9-1979 to the tune of rs. 9,09,186.35 during october, 1981 to may, 1982.2. that a demand-cum-show cause notice was issued to the party under c.no. 10-demand/hindalco/82/331, dated 4-6-1982 by the superintendent central excise range-iv, mirzapur for rs. 9,09,186.35 which they wrongly availed as set off because hard pitch, soft pitch and coaltar pitch are used in the manufacture of cathodes and anodes which fall under t.i. 68 and were exempted from payment of duty vide notification 118/75 when consumed captively.3. that the assistant collector central excise, mirzapur under his order-in-original dated 28-12-1982 issued under c. no. v(3) demand/91/82/5660 dated 30-12-1982 confirmed the demand of rs. 9,09,186.35 under section 11-a of central excises and salt act, 1944 on the ground that hard pitch, soft pitch and coaltar pitch are not inputs for the manufacture of aluminium. thus the set off of duty paid on pitch availed for the clearance of aluminium between october 1981 to may, 1982 was irregular.4. that the assessee i.e. m/s. hindalco, mirzapur went in appeal before the appellate collector, central excise, new delhi. after giving proper opportunities, the collector (appeals) in his order-in-appeal no.73-ce/alld/87 inclined to agree with the ratio of the aforesaid decision and held that soft pitch, hard pitch and coaltar pitch even when first converted into cathodes and anodes, will have to be deemed as having been used in the manufacture of alumina as for the purpose of notification no. 201/79 dated 4-6-1979.5. the collector of central excise, allahabad has challenged the order of collector (appeals).6. shri somesh arora, ld. d.r. for the appellant collector, contended that where the materials are used in manufacture of intermediate products, they cannot be considered as raw-materials used in the emergence of the final product. here soft pitch and hard pitch are used for producing cathodes and anodes which are themselves excisable goods.since soft pitch and hard pitch are not directly used as raw-materials for the manufacture of aluminium, the ld. d.r. urged, duty paid thereon is not eligible for set off in respect of clearance of aluminium, under notification 201/79. the ld. d.r. pointed out that this argument specifically and fully finds support in the decision of the tribunal in collector of central excise v. muthu chemical industries - 1986 (26) e.l.t. 581, which, the ld. d.r. pleaded, is good law so far as this aspect is concerned even after the supreme court decision on certain aspects of the same notification in the case of collector v. ballarpur industries 7. the ld. counsel, shri n.r. khaitan for the respondents contended that after the supreme court has laid down the law as to what would constitute raw-material for purposes of notification 201/79 in the case of ballarpur industries case (supra), the tribunal decision in the case of muthu chemicals is no more good has to be considered over-ruled. ld.counsel cited other tribunal decisions -1987 (32) e.l.t. 579 in the case of collector of central excise v. m.r.e. and 1988 (38) e.l.t. 174 - jenson nicholson v. collector of central excise following mrf case, wherein it has been held that it is not necessary for the material to be directly used in the manufacture of the final product in order to be eligible for set off of duty under notification 201/79. reliance was also placed on the tribunal's decision in the case of ballarpur industries v. collector of central excise -1989 (39) e.l.t. 710 that materials having essential function in the manufacture of final product have to be considered as raw-material for the purpose of notification 201/79.8. the submissions made have been carefully considered. the materials concerned in this case are hard, soft and coaltar pitch and the question is whether they can be considered eligible for set off of duty under notification 201/79 as inputs in the nature of raw-materials or component parts used in the manufacture of aluminium. the role of these materials in the process for manufacture of aluminium has been stated in assistant collector's order as follows : "soft pitch is used as a lining material electrolytic (sic) cells and acts as a cathode. when electrolysis takes place, aluminium metal is produced and it settles down on the cathode. similarly hard pitch and - or coaltar pitch is used for carbon anodes and these anodes are suspended in the pot cell for the purpose of passing electric current through the electrolyte. they have emphasised that these three kinds of pitch are essential inputs for the manufacture of aluminium and aluminium cannot be manufactured without them." the lower authorities have rejected the claim on the ground that the materials are not used directly in the production of aluminium but are used to prepare cathodes and anodes which are intermediate products.however, on this very issue, we find there are tribunal decisions which do not support the department's case. in the case of indian aluminium v. collector of central excise - 1987 (30) e.l.t. 514, it has been held that a raw-material is a material that is put into the manufacturing system to help the formation of the finished product and the tribunal further held that there is no authority to say that an input or raw-material must go directly into the finished product. the tribunal observed that as long as it is consumed and utilised in that, results in the production or manufacture of the article in which the system is engaged it would be a raw-material and an input for the finished product. above all, the supreme court decision in the case of ballarpur industries (supra) has laid down that input used in the integrated process of manufacture is raw-material used in the end product. it has further been held by the supreme court in the case of collector of central excise v. east end paper india -1989 (43) e.l.t. 201 (sc) that anything that enters into and forms part of the manufacturing process is raw-material or component part. the ratio of the two above supreme court decisions were applied by the tribunal in formica india v.collector of central excise see 1989 (43) e.l.t. 585 (tri.). in the present case, applying the ratio of the supreme court and tribunal decisions, hard, soft and coaltar pitch do enter into and form an essential part of manufacturing process of aluminium. as such have to be considered as raw-material eligible for set off under notification 201/79. there is no reason therefore, to interfere with collector (appeals) order. the appeal is rejected.

Judgment:
M/s Hindustan Aluminium Corporation Ltd., Ranukot, Distt. Mirzapur (appellants) manufactures aluminium products. They brought in their factory Hard Pitch, Soft and Coaltar Pitch after payment of duty on the same under T.I. 68 and use the same to manufacture cathodes and anodes which are used in the electrolytic pot cells and availed set off of duty paid on pitch while clearing aluminium and its manufactures as provided in Notification No. 201/79 dated 4-9-1979 to the tune of Rs. 9,09,186.35 during October, 1981 to May, 1982.

2. That a demand-cum-show cause notice was issued to the party under C.No. 10-Demand/Hindalco/82/331, dated 4-6-1982 by the Superintendent Central Excise Range-IV, Mirzapur for Rs. 9,09,186.35 which they wrongly availed as set off because Hard Pitch, Soft Pitch and Coaltar Pitch are used in the manufacture of cathodes and anodes which fall under T.I. 68 and were exempted from payment of duty vide Notification 118/75 when consumed captively.

3. That the Assistant Collector Central Excise, Mirzapur under his Order-in-Original dated 28-12-1982 issued under C. No. V(3) Demand/91/82/5660 dated 30-12-1982 confirmed the demand of Rs. 9,09,186.35 under Section 11-A of Central Excises and Salt Act, 1944 on the ground that Hard Pitch, Soft Pitch and Coaltar Pitch are not inputs for the manufacture of aluminium. Thus the set off of duty paid on pitch availed for the clearance of aluminium between October 1981 to May, 1982 was irregular.

4. That the assessee i.e. M/s. Hindalco, Mirzapur went in appeal before the Appellate Collector, Central Excise, New Delhi. After giving proper opportunities, the Collector (Appeals) in his Order-in-Appeal No.73-CE/Alld/87 inclined to agree with the ratio of the aforesaid decision and held that Soft Pitch, Hard Pitch and Coaltar Pitch even when first converted into cathodes and anodes, will have to be deemed as having been used in the manufacture of alumina as for the purpose of Notification No. 201/79 dated 4-6-1979.

5. The Collector of Central Excise, Allahabad has challenged the order of Collector (Appeals).

6. Shri Somesh Arora, ld. D.R. for the appellant Collector, contended that where the materials are used in manufacture of intermediate products, they cannot be considered as raw-materials used in the emergence of the final product. Here soft pitch and hard pitch are used for producing cathodes and anodes which are themselves excisable goods.

Since soft pitch and hard pitch are not directly used as raw-materials for the manufacture of aluminium, the ld. D.R. urged, duty paid thereon is not eligible for set off in respect of clearance of aluminium, under Notification 201/79. The ld. D.R. pointed out that this argument specifically and fully finds support in the decision of the Tribunal in Collector of Central Excise v. Muthu Chemical Industries - 1986 (26) E.L.T. 581, which, the ld. D.R. pleaded, is good law so far as this aspect is concerned even after the Supreme Court decision on certain aspects of the same notification in the case of Collector v. Ballarpur Industries 7. The ld. Counsel, Shri N.R. Khaitan for the respondents contended that after the Supreme Court has laid down the law as to what would constitute raw-material for purposes of Notification 201/79 in the case of Ballarpur Industries case (supra), the Tribunal decision in the case of Muthu Chemicals is no more good has to be considered over-ruled. Ld.

Counsel cited other Tribunal decisions -1987 (32) E.L.T. 579 in the case of Collector of Central Excise v. M.R.E. and 1988 (38) E.L.T. 174 - Jenson Nicholson v. Collector of Central Excise following MRF case, wherein it has been held that it is not necessary for the material to be directly used in the manufacture of the final product in order to be eligible for set off of duty under Notification 201/79. Reliance was also placed on the Tribunal's decision in the case of Ballarpur Industries v. Collector of Central Excise -1989 (39) E.L.T. 710 that materials having essential function in the manufacture of final product have to be considered as raw-material for the purpose of Notification 201/79.

8. The submissions made have been carefully considered. The materials concerned in this case are hard, soft and coaltar pitch and the question is whether they can be considered eligible for set off of duty under Notification 201/79 as inputs in the nature of raw-materials or component parts used in the manufacture of aluminium. The role of these materials in the process for manufacture of aluminium has been stated in Assistant Collector's order as follows : "Soft pitch is used as a lining material Electrolytic (sic) Cells and acts as a Cathode. When electrolysis takes place, aluminium metal is produced and it settles down on the cathode. Similarly hard pitch and - or coaltar pitch is used for carbon anodes and these anodes are suspended in the pot cell for the purpose of passing electric current through the electrolyte. They have emphasised that these three kinds of pitch are essential inputs for the manufacture of aluminium and aluminium cannot be manufactured without them." The lower authorities have rejected the claim on the ground that the materials are not used directly in the production of aluminium but are used to prepare cathodes and anodes which are intermediate products.

However, on this very issue, we find there are Tribunal decisions which do not support the Department's case. In the case of Indian Aluminium v. Collector of Central Excise - 1987 (30) E.L.T. 514, it has been held that a raw-material is a material that is put into the manufacturing system to help the formation of the finished product and the Tribunal further held that there is no authority to say that an input or raw-material must go directly into the finished product. The Tribunal observed that as long as it is consumed and utilised in that, results in the production or manufacture of the article in which the system is engaged it would be a raw-material and an input for the finished product. Above all, the Supreme Court decision in the case of Ballarpur Industries (supra) has laid down that input used in the integrated process of manufacture is raw-material used in the end product. It has further been held by the Supreme Court in the case of Collector of Central Excise v. East End Paper India -1989 (43) E.L.T. 201 (SC) that anything that enters into and forms part of the manufacturing process is raw-material or component part. The ratio of the two above Supreme Court decisions were applied by the Tribunal in Formica India v.Collector of Central Excise see 1989 (43) E.L.T. 585 (Tri.). In the present case, applying the ratio of the Supreme Court and Tribunal decisions, hard, soft and coaltar pitch do enter into and form an essential part of manufacturing process of aluminium. As such have to be considered as raw-material eligible for set off under Notification 201/79. There is no reason therefore, to interfere with Collector (Appeals) order. The appeal is rejected.