Customs, Excise and Gold Tribunal - Delhi
Travancore Titanium Products Ltd. vs Colletor Of C. Ex. on 1 December, 1995
Equivalent citations: 1996(82)ELT229(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. These are two appeals, one filed by M/s. Travancore Titanium Ltd., Trivandrum and the other filed by the Revenue against the same order-in-appeal dated 28-2-1984 of the Collector of Central Excise (Appeals), Madras.
2. The matter relates to the valuation of the Sulphuric Acid produced by M/s. Travancore Titanium Products Ltd. (hereinafter referred to as TTP) for their captive use in the production of Titanium Dioxide. The two important raw materials for the production of Titanium Dioxide were Sulphur and Illmenite. The sulphur was used for the production of Sulphuric Acid which was subsequently used in the process of manufacture of Titanium Dioxide. Sulphuric Acid was classifiable under Item No. 14G of the old Central Excise Tariff and was dutiable on the basis of the value. For arriving at the value of Sulphuric Acid, TTP declared their direct costs and indirect costs. For arriving at the indirect costs, the total cost was divided by them by their normal production capacity and not by the actual production of Sulphuric Acid. The Asstt. Collector of Central Excise, Trivandrum who adjudicated the matter had taken the actual production as the basis for arriving at the indirect costs. The assessee had deducted Rs. 133.09 per Tonne as credit for steam. This was disallowed by the Asstt. Collector of Central Excise. In the show cause notice, it was stated that a 10% margin of profit should also be added to the cost which was reduced by the Asstt. Collector in his adjudication order to 0.1%. The Collector Central Excise (Appeals), Madras while affirming the order of the Asstt. Collector had given relief with respect to the steam generated as a by-product in the production of Sulphuric Acid while ordering that the steam generated by the party in their Boiler must be ignored and that only the quantity of steam generated as by-product in the manufacture of Sulphuric Acid should be considered and abatement given from the cost of production of Sulphuric Acid, i.e., Rs. 892.95. TTP had come in appeal on the point that for arriving at the indirect costs, the total costs should be divided by their normal production capacity which they have indicated as below :
75% of rated capacity (350 T/day) 262 . 3T x 400 days = 105,000 Tonnes.
The Revenue had divided these total costs for arriving at the indirect costs by their actual production. The Revenue has come in appeal on the issue of deduction of cost of steam, a by-product. We have heard Ms. Mukti Sinha, Advocate and Shri Vijay Singh, SDR. In so far as the direct costs are concerned, there is no dispute. In so far as indirect costs are concerned, we find that the Revenue has accepted their total costs as declared. To arrive at the cost per tonne, the Revenue has divided these total costs by the actual production of Sulphuric Acid. The normal production capacity has not been reached by TTP. The indirect costs cannot be related to the notional figures which the manufacturer had not reached. The costs have to be spread on the actual production and we do not find any infirmity in the approach of the Revenue. The margin of profit of 10% as indicated in the show cause notice had already been reduced by the original adjudicating authority as 0.1%.
3. Now coming to the question of the cost of steam which is generated in the process of the manufacture of Sulphuric Acid, the ld. Collector Central Excise (Appeals) Madras in para 7 of his order had stated as under :
However, I find considerable force in appellants' argument that the cost of production of sulphuric acid would be influenced by generation of steam as a by-product, since steam was being used by them captively to heat illmenite, thereby resulting in saving of fuel. Consequently, the cost of production of sulphuric acid must be deducted by a figure representing the value of steam generated as a by-product and this value has to be determined, by calculating the actual saving in monetary terms on fuel, which appellants would have used in the absence of steam. I also observe that steam was also generated by appellants in their boiler and this quantity of steam must be ignored and only the quantity of steam generated as by-product in the manufacture of sulphuric acid should be considered and abatement must be made from the cost of production of sulphuric acid viz., Rs. 892.95 to the extent of value of steam generated as by-product, which value must be determined in the manner indicated above. Hence, this portion of the order of the Asstt. Collector is vacated, with the direction that abatement may be extended from the cost of production of sulphuric acid to the extent of value of steam generated as by-product in the manufacture of sulphuric acid and the assessable value be re-determined in the light of the above observation."
4. The Revenue had felt aggrieved with the observation of the ld. Collector Central Excise (Appeals) that the cost of production of sulphuric acid must be deducted by a figure representing the value of steam generated as a by-product and this value is to be determined by calculating the actual saving in monetary terms of fuel which the appellants would have used in the absence of steam. The ld. Collector (Appeals) had referred that the steam generated as a by-product was used by TTP captively to heat illmenite. Thus, it is clear that when he was referring to the savings in monetary terms of fuel, he was referring to the heating of illmenite and not to the production of sulphuric acid which in fact had already taken place when the steam is generated as a by-product. The ld. Collector (Appeals) had only allowed abatement in respect of that steam which is used for heating of illmenite or any other process subsequent to the production of Sulphuric Acid. We do not find any infirmity in the approach adopted by the Collector of Central Excise (Appeals) and the appeal filed by the Revenue merits rejection.
5. Taking all the relevant considerations into account, we find no merit in either of the appeals by TTP and the one filed by the Revenue. Both the appeals are rejected.