Customs, Excise and Gold Tribunal - Tamil Nadu
Sterlite Industries (I) Ltd. vs Commissioner Of C. Ex. on 30 November, 2005
ORDER P.G. Chacko, Member (J)
1. The appellants are manufacturers of Copper anode and byproducts. The main raw material for these products is Copper concentrate, which is imported. The appellants are availing Cenvat credit of countervailing duty paid on this raw material. Investigators of the Department found that, from 1997-98 to Sept. '02, the appellants had taken Modvat/Cenvat credit of countervailing duty on the quantities of Copper concentrate samples drawn for testing. It appeared to the Department that these quantities were not used in, or in relation to, the manufacture of Copper anodes and hence Modvat/Cenvat credit on these quantities of input was not admissible to the assessee. On this basis, a show cause notice dated 25-2-2003 invoking the extended period of limitation was issued to the party asking them to reverse the above credit and proposing penalty on them. Upon receipt of this notice, the party reversed the credit taken on 80% of the total samples weight, which had been removed out of their factory for testing by an external agency (M/s SGS India Ltd). In respect of the balance quantity (20%) of the input samples, which was captively tested in the appellants own laboratory within the factory premises, they pleaded, in their reply to the show cause notice, that this quantity after testing was later on fed into the smelter for manufacture of the final product. This plea was not accepted by the original authority, which held that the quantity of Copper concentrate samples drawn for testing within the factory premises was not used in, or in relation to, the manufacture of Copper anodes and hence Modvat/Cenvat credit was not admissible to the assessee in respect of this quantity. This decision was affirmed by the first appellate authority. Hence the present appeal.
2. Ld. Counsel reiterates the grounds of this appeal and submits that the input samples in question (20% ibid) having been ultimately fed into the stream of the process of manufacture of Copper anodes should be held to have been used in the manufacture of the final product and accordingly Modvat/Cenvat credit should be allowed. In this connection, it is submitted that it is not the Department's case that any part of such samples was removed out of the factory. Ld. Counsel has relied on the following decisions of the Tribunal :-
(i) Biddle Sawyer Ltd. v. CCE, Mumbai .
(ii) CCE, Mumbai v. Kolsite Machine Fabrik Pvt. Ltd. 2004 (176) E.L.T. 673 (Tri.-Mumbai).
(iii) Manali Petrochemicals Ltd. v. CCE, Chennai 2004 (167) E.L.T. 434 (Tri.-Chennai).
She has also supplied a write-up of conversion of Copper concentrate into Copper anodes, as also a detailed technical note on manufacturing process. Ld. SDR has reiterated the findings recorded by the lower authorities.
3. After considering the submissions, I find that both the lower authorities have denied to the assessee Modvat/Cenvat credit on the test samples in question on the ground that these goods were not used in, or in relation to, the manufacture of Copper anodes. They have found no evidence of these goods having been used in, or in relation to, the process of manufacture of Copper anodes in the appellants' factory. Ld. Counsel has asserted that it was absolutely necessary for the appellants to test samples of the imported input, for the percentage of moisture, before feeding the raw material into the primary smelter. After a perusal of the write-up supplied today by ld. Counsel, I have not found any mention of this necessity, either in the statement of the process of conversion of Copper ore to Copper anodes or in the detailed note on the manufacturing process. Ld. Counsel has driven my attention to a relevant plea contained in the reply to the show cause notice, which is to the effect that the tested samples of Copper concentrate were ultimately fed into the primary smelter. This plea, however, is not supported by any documentary evidence. Had it been absolutely necessary for the assessee to test samples of the imported input within their factory for determining the moisture content of the goods before subjecting it to the process of manufacture of Copper anodes, it would have occurred to them that appropriate registers should be maintained governing issue of tested samples from the laboratory to the manufacturing plant. Obviously, no such register was maintained by the appellants. In the circumstances, the finding recorded by the lower authorities that there is no evidence of the test samples having been used in, or in relation to, the manufacture of Copper anodes cannot be faulted. None of the decisions cited by Id. Counsel is applicable to the facts of this case. In the case of Biddle Sawyer Ltd. (supra), inputs used for quality testing as required under Drugs and Cosmetics Act, 1940 were held to be cenvatable. In the instant case, it has not been shown that the testing of input samples was done as per any statutory requirement. In the case of Kolsite Machine Fabrik Pvt. Ltd. (supra), goods used for the purpose of testing final product to ensure that such product conformed to the specifications of customers were held to be modvatable under Rule 57A of the Central Excise Rules, 1944. In the present case, the tests in question were not done on any final product. They were done on the raw material, and, that too, without maintaining the necessary registers and without establishing that such testing was an essential pre-requisite for the manufacture of Copper anodes. In the case of Manali Petrochemicals Ltd. (supra), the Tribunal was not dealing with modvatability of any input.
4. For the reasons noted above, I do not see any valid reason to interfere with the decision of the lower authorities to disallow input-duty credit on the samples of Copper concentrate used up for testing in the assessee's laboratory. However, I do not think that this is a fit case for imposition of maximum penalty under Section 11AC on the assessee. The credit in question was taken on a negligibly small quantity of the imported raw material. The credit taken on the samples drawn and despatched out of the factory for testing by another agency was voluntarily reversed by the party as soon as their mistake was pointed out by the Department. What survived for the Department to issue show cause notice was only 20% of the total quantity of input drawn for testing. Having regard to these facts and circumstances, the lower authorities ought to have imposed a lesser amount of penalty. I reduce the quantum of penalty to Rs. 5,000/- (Rupees Five Thousand only). The appeal is disposed of in the above terms.
(Dictated and pronounced in open Court)