1999 (8) TMI 888 - AT - Central Excise

Summary

Issues Involved:
1. Whether water should be considered as a raw material for determining the percentage of fly-ash and phospho-gypsum in asbestos cement products for the benefit of Notification No. 38/93-C.E.
2. Whether the deletion of the expression "(minus the water-content)" in Notification No. 79/93-C.E. implies that water must be included in the calculation of raw materials.
3. Whether the demand of duty based on non-declaration of water as a raw material is justified.
4. Whether the process and records maintained by the appellant were sufficient for determining the percentage of fly-ash used.

Issue-wise Detailed Analysis:

1. Consideration of Water as a Raw Material:
The appellant manufactures asbestos cement products and did not declare water as a raw material in their classification list. The Revenue contended that the appellant used 3500 liters of water per batch, which should be included in calculating the percentage of raw materials, including fly-ash and phospho-gypsum. The appellant argued that water is used only as a facilitator in the manufacturing process and is mostly recycled, with only a small percentage remaining in the final product as moisture. The Tribunal noted that the water used in the process is largely retrieved and recycled, and only a minor portion remains in the final product.

2. Implication of the Deletion of "(minus the water-content)":
Notification No. 38/93-C.E. initially excluded water content from the calculation of raw materials. However, this exclusion was deleted by Notification No. 79/93-C.E., which the Revenue interpreted as necessitating the inclusion of water in the calculation. The Tribunal disagreed with this interpretation, stating that the deletion aimed to address practical difficulties in determining the dry weight of the finished goods. The Tribunal concluded that the actual weight of the finished goods should be considered, not the collective weight of all raw materials, including water.

3. Justification of Duty Demand:
The Revenue issued show cause notices alleging suppression of water usage as a raw material and demanded duty for periods exceeding six months. The appellant argued that the department was aware of their manufacturing process and the records maintained, which did not treat water as a raw material. The Tribunal found that the department's earlier notifications and prescribed records did not consider water as a raw material. Therefore, the demand for duty based on this ground was deemed untenable.

4. Sufficiency of Process and Records:
The appellant maintained records and monthly returns regarding the use of fly-ash and other raw materials as prescribed by the department. The appellant argued that these records were sufficient to determine the percentage of fly-ash used in the finished goods. The Tribunal agreed, noting that the department's own prescribed records did not include water as a raw material. The Tribunal concluded that the appellant's records and process were adequate for determining the percentage of fly-ash used.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, concluding that water should not be considered a raw material for determining the percentage of fly-ash and phospho-gypsum. The deletion of the exclusion of water content was meant to simplify the calculation process, not to include water as a raw material. The demand for duty based on non-declaration of water was not justified, and the appellant's records were sufficient for determining the use of fly-ash.