1994 (4) TMI 189 - AT - Central Excise

Summary

Issues:
- Whether certain materials used in the manufacturing process can be considered as raw materials eligible for set off of duty under Notification 201/79.
- Whether the materials, such as hard, soft, and coaltar pitch, are integral to the manufacturing process of aluminium.

Analysis:

1. The case revolved around the eligibility of certain materials, specifically hard, soft, and coaltar pitch, for set off of duty under Notification 201/79. The appellant, a manufacturer of aluminium products, used these materials to manufacture cathodes and anodes, which were then used in the production of aluminium. The dispute arose when a demand-cum-show cause notice was issued, challenging the set off availed by the appellant on the grounds that the materials were not direct inputs for the manufacture of aluminium.

2. The Assistant Collector, in his Order-in-Original, confirmed the demand under Section 11-A of the Central Excises and Salt Act, 1944, stating that the materials in question were not inputs for the manufacture of aluminium. The Collector (Appeals) also agreed with this decision, emphasizing that the materials, even when converted into cathodes and anodes, were not directly used in the manufacture of alumina as required by Notification 201/79.

3. The appellant contended that the materials were used in the production of intermediate products, namely cathodes and anodes, which were excisable goods themselves. The appellant argued that since the materials were not directly used as raw materials for aluminium, the duty paid on them should not be eligible for set off under Notification 201/79. The appellant relied on the decision in Collector of Central Excise v. Muthu Chemical Industries to support this argument.

4. Conversely, the respondent's counsel argued that based on the Supreme Court's interpretation in the case of Ballarpur Industries, materials having an essential function in the manufacture of the final product should be considered as raw materials for the purpose of Notification 201/79. The counsel cited various Tribunal decisions supporting this interpretation, including Collector of Central Excise v. M.R.F. and Jenson Nicholson v. Collector of Central Excise.

5. The Tribunal analyzed the role of the materials, hard, soft, and coaltar pitch, in the manufacturing process of aluminium. The lower authorities had rejected the claim, stating that the materials were used to prepare intermediate products. However, the Tribunal referred to previous decisions, such as Indian Aluminium v. Collector of Central Excise, which defined raw materials as materials that aid in the formation of the finished product, regardless of whether they directly enter the final product.

6. Applying the principles established by the Supreme Court in Ballarpur Industries and East End Paper India, the Tribunal concluded that the materials in question, hard, soft, and coaltar pitch, were essential components of the manufacturing process of aluminium. Therefore, the Tribunal upheld the Collector (Appeals) order, ruling that the materials were eligible for set off under Notification 201/79. The appeal was rejected based on this analysis.