Customs, Excise and Gold Tribunal - Calcutta
National Aluminium Company Limited vs Commissioner Of Central Excise And ... on 11 November, 2003
ORDER Archana Wadhwa, Member (J)
1. Vide the impugned order, the Commissioner has confirmed the demand of duty of Rs. 52,88, 112.00 (Rupees fifty-two lakh eighty-eight thousand one hundred and twelve) against the appellant company by rejecting the MODVAT credit and an equivalent amount of personal penalty has been imposed. shri S. K. Bagaria, learned Sr. Advocate appearing for the appellant company, submits that during the process of manufacture of their final product, some invisible losses of various inputs occurred at different stages. To reduce such losses, the appellants appointed a technical expert i.e. M/s. Tata Consultancy Services for Study of Material Handling Losses and to suggest the measures and the precautions required to be taken for reduction of the said losses at various points. In the Report given by the said Consultancy Services, various points were identified and effective measures to be taken by the appellants for reducing the said losses, were also suggested. The entire Order of the commissioner is based upon the estimated losses reflected in the said Report.
2. Shri Bagaria, learned Sr. Advocate for the appellants submits that as is evident from the Report of the Tata Consultancy Services, various points of the said material Handling Losses within the factory, were identified as under :-
"Spillage and drifting of aluminum powder during slico-opening of the bags and pouring the material in the hopper.
Adherent aluminum fluoride in the empty HDPE sacks.
Spillage of material while shifting the filled up mobile hopper from the godown to the pot line with the help of forklift."
Spillage from conveyor belt U204 during loading and transfer. However, this is partly a recoverable loss.
Accumulation of material at transfer point (conveyor no. 204 and 209). This loss is due to the inefficient functioning of the de-dusting system. This loss is largely recoverable in nature.
There is evaporation loss in the melter due to the heating operation.
here is leakage loss from the glands of the transfer pumps. This leakage can be recovered and recycled.
Non-recoverable loss at transfer point (conveyor no. 78 and 79), through working of the de-dusting system. Since the floor of this transfer point is grate type, a major portion of the drifted and spilled material gets lost to the atmosphere.
Non-recoverable loss at the silo top through the de-dusting unit Non recoverable loss below the silos, through the dedusting units.
At the time of unloading, a portion of coke (mainly dust) gets lost to the atmosphere. This is also a non-recoverable airborne loss."
"Unloading operation : During the fixing and removal of the flexible conveying hose to the wagon outlet valve, there may be spillage at the platform. Also some loss due to drift to outside the platform area may occur, specially during windy weather.
Transfer points : Spillage of material at each transfer point., between the conveyers.
Conveyer : Accumulation of material on the conveyor walkways due to the material being carried over by the returning conveyor belt beyond the scrapper. This material falls due to gravity and collects beneath the belt.
De-dusting units; Material loss can take place in case of improper functioning of the de-dusting units or damage of the dust collecting filters/bags".
"Losses due to spillage and air-borne particles were measures between the stages of unloading of the wagons and the transfer to Silo#3 by sweeping and weighing of spilled and/or drift deposited alumina, and measuring SPM".
a) Spillage from wagon during hose fixing
b) Spillage-drift deposit on unloading platform
c) Air-borne displacement from unloading area
d) Belt conveyer loss-material transfer to primary silo
e) De-dusting units loss-material transfer to primary silo "Theoratically, the system should not have any conveying loss. But it has been observed that due to the age of the equipment and lack of maintenance there are certain losses of alumina at transfer points in the belt conveyer system.
The losses observed were in the form of deposits on conveyor walkways, on both sides of the transfer points. This is due to the settling of suspended alumina particles that cannot be trapped by the operating de-dusting units".
"Due to the designed emission levels of the de-dustling units, the exhaust air from these contains a certain amount of dust, which is lost to the atmosphere during the operation of the system".
"Sometimes alumina is received by trucks at the smelter plant, packed in 50-Kg HDPE sacks. This alumina is stored in the alumina godwon and transported to rodding section for pack filling of the anode top. The entire operation is manual and the sacks are head loaded and dumped from one place to another. In the process, some alumina is puffed-out of the sacks and is lost. This is besides the loss of the alumina that adheres to the sack after emptying."
"Following are the problem causes of the oil loss in the handling system:
Oil loss at the unloading point during fixing and removing the flexible hoses to the tanker. Residual oil, if any, in the tanker which can not be unloaded completely. Gland leakage, if any, of the unloading and transfer pumps.
Leakage of oil, if any, at the consumer's end due to open valve, while the corresponding burners are not in operation, but the transfer pumps is in operation."
The Report also gave an estimated percentage of loss or waste of various inputs. The same was much below 1% in case of each and every input. He submits that as per the Board's Circular published in Bulletin - January to March, 1965, Volume XI, Page-55, it has been clarified that the quantum of storage and processing loss depend upon facts and circumstances of each individual case, where evaporation and pilferage can take place, one percentage was prescribed as permissible loss.
4. Shri Bagaria's contention is that there is no dispute that the entire quantity of the inputs as reflected in the invoice was received in their Unit and the loss identified by the Expert Tea, was invisible loss and as such, has to be considered as waste, in which case, the same would be covered by the provisions of Rule 57D. Reliance has been placed on a number of decisions of the Tribunal.
5. The demand has been assailed on the point of limitation also.
6. We have heard Shri J. R. Madhiam, J. D. R. for the Revenue.
7. Admittedly, it is not a case where an input. on which the appellant company has taken the MODVAT Credit was found short by the Revenue. The entire case of the Revenue is based upon the storage and material handling losses detected by the experts appointed by the appellants themselves. Whether the MODVAT Credit can be reduced on such losses or not, is well-settled. The Tribunal in the case of Bhoruka Textiles Limited vs. C. C. Ex. reported in 2002-TAXINDIAONLINE-63-CESTAT-MAD, has held that minor shortage due to dryage and due to handling after the inputs have been received in full, cannot be made the ground for denial of the MODVAT Credit. Similarly, in the case of C. C. Ex. vs. Vindhya Pipes & Plastics Limited reported in 2003-TAXINDIAONLINE-57-HC-P & H-CX, it was held that the losses in inputs within the factory had arisen due to factors, such as natural loss during processing and during handling, and the MODVAT Credit was admissible and could not be disallowed. Similarly, in the case of Hindustan Petroleum Corporation Limited vs. C. C. Ex. reported in 2001(44) RLT-193, MODVAT Credit was held to be admissible in respect of petroleum products lost on account of various factors, such as, spillage, pipeline losses, handling losses, evaporation losses etc.
8. Inasmuch as the losses in the instant case are on account of material handling losses and are, in fact, invisible losses, the Commissioner in our view, was not justified in rejecting the MODVAT Credit on the same. Accordingly, we set aside the impugned Order and allow the appeal with consequential relief to the appellants.