1996 (11) TMI 227 - AT - Central Excise

Summary

Issues:
- Calculation of irretrievable losses in the process of manufacturing motor vehicle parts involving scrap of iron and steel.
- Methodology of calculating invisible losses and its impact on the Central Excise duty assessment.

Analysis:
1. Calculation of Irretrievable Losses:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved a dispute regarding the calculation of irretrievable losses in the manufacturing process of motor vehicle parts using scrap of iron and steel. The department alleged that the appellant had not paid Central Excise duty on the waste/scrap generated during the process of forging and rough turning at job workers' units. The adjudicating authority conducted an experiment to determine the irretrievable losses and confirmed the demand of duty on the scrap generated. The appellant challenged this calculation, arguing that the method used by the Additional Collector was indirect and led to incorrect results. However, the consultant for the respondent contended that the Additional Collector's calculation was based on actual experiments and that there are always irretrievable losses in such processes. The Tribunal noted the experiment conducted by the adjudicating authority, which revealed invisible losses in the manufacturing process. The Tribunal also referred to a previous case where an invisible loss of 12% was allowed, compared to the 11% loss allowed in the present case. Ultimately, the Tribunal upheld the adjudicating authority's decision, stating that the invisible loss was reasonable and consistent with previous decisions.

2. Methodology of Calculating Invisible Losses:
The second issue revolved around the methodology of calculating invisible losses and its impact on the assessment of Central Excise duty. The appellant argued that the method used by the Additional Collector to calculate the quantity of scrap generated did not consider irretrievable losses at each stage of the process. On the other hand, the consultant for the respondent maintained that the experiment conducted by the adjudicating authority accurately reflected the presence of irretrievable losses in the manufacturing process. The Tribunal considered the arguments from both sides and observed that the adjudicating authority's calculation included invisible losses, which were not adequately addressed in the department's appeal memo. The Tribunal found no basis for rejecting the invisible loss calculated by the adjudicating authority, especially considering that a similar case had allowed a higher percentage of invisible loss. Consequently, the Tribunal upheld the impugned order, rejecting the appeal and affirming the duty assessment based on the calculation of invisible losses.