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TMI Blog2004 (4) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be either in the manufacture of the finished products or in the loss during the process manufacture of the finished products which starts from the stage of taking the raw materials from the storage bay to the factory and onward processes. Therefore, the losses have occurred during these processes. According to Rule 57D, on such losses credit cannot be denied. We find that in this case, the appellants have written off the shortages which were lost during the process of manufacture. Therefore we find that 1% to 1.5% loss in the present case is a reasonable loss during the process of manufacture and duty cannot be demanded on the inputs which were lost during the process of manufacture. Therefore we set aside the orders of the Commissioner and allow all the appeals. - HON'BLE S.L. PEERAN (J) AND K.C. MAMGAIN (T), MEMBERS For the Appellant : G.P. Sastry, Adv. For the Respondent : A. Jayachandran, SDR Order K.C. Mamgain, Member (T) 1. These four appeals have been filed by M/s. Hindustan Zinc Ltd., Visakhapatnam against O-I-O No. 224/03-04, RP, dated 30-4-2003 and O-I-O No. 20/99-ASR, dated 18-10-1999 passed by the Commissioner of Central Excise Visakhapatnam. 2. Shri G. Shivada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which credit was taken. The credit is being recovered on the shortages of zinc/lead concentrates found during physical stock taking by the appellants themselves and recorded in their own books of accounts. The shortages are less than 1.5 % and attributable purely to handling loss. The factors for shortages are : (a) Loss of moisture in the concentrate (b) Fly-over losses during the elaborate process of handling the concentrate (c) Arriving at the weight of the concentrate on an approximate basis. There is no allegation that the inputs found short were not received in the factory or after receipt they were removed from the factory. Rule 57A(4) specifically provides that credit of specified duty shall be allowed on inputs used in the manufacture of final products as well as on inputs used in or in relation to manufacture of final products whether directly or indirectly and whether contained in the final product or not. The process of handling raw-material is a part of the process carried out in or in relation to the manufacture of final product has been settled down by the Supreme Court in the case of CCE v. Rajasthan State Chemical Works reported in 1991 (55) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Pushpam Pharmaceuticals Co. v. CCE, Bombay, 1995 (78) E.L.T. 401 (S.C.) (iii) Khatao Makanji Spg. Wvg. Co. v. CCE, Bombay, 1999 (108) E.L.T. 378 (iv) Swathy Chemicals Ltd. v. CCE, 1999 (114) E.L.T. 531 5. Shri Jayachandran learned SDR appearing for the Revenue pleaded that in case of Appeal No. E/71/2000 for the O-I-O No. 20/99/ASR, the Commissioner has found that all the reasons projected by them are only presumptions and assumptions. Spillage, if at all any, can occur only out of the specified quantity of concentrates issued from the stock. Such spillage cannot reduce the quantity in stock. The loss of moisture content is also not correct as weight recorded in their records was only the dry weight estimated by the mines as indicated in the invoices. When the goods were stored in open, weight can also get increased due to absorption of moisture by the concentrate. There is no reason for the person estimating the stock to underestimate the quantity and the Company to accept it and include in their balance-sheet. He did not accept the ground put forward by the appellants. As regards the Appeal Nos. E/758-760/03 Shri Jayachandran pleaded that in O-I-O, the Commissioner has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has taken place was detected in the annual stock taking. The appellants had accounted for the shortage found during stock taking at the end of each financial year by writing off these losses. The percentage of the shortage found is less than 1.5% on an average for all these years. We find that the explanation given by the appellants is that the reason for the shortage is due to handling loss during the process of taking the goods from bay to bins and subsequent manufacturing losses. They have given other reasons also like dryage of the moisture content, inaccurate estimation due to volumetric stock verification etc. There is no doubt that the inputs were received in the factory. It is also not the case of the department that these were cleared from the factory, without payment of duty. Therefore, these have been used within the factory and that use may be either in the manufacture of the finished products or in the loss during the process manufacture of the finished products which starts from the stage of taking the raw materials from the storage bay to the factory and onward processes. Therefore, the losses have occurred during these processes. According to Rule 57D, on such l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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