1987 (1) TMI 370 - AT - Central Excise

Excise duty appeal success: Molten iron transit losses key. Duty payment principles upheld. Notification 54/65 exemption.

The appeal was allowed in a case concerning the assessment of excise duty on a differential quantity of molten iron sent from a blast furnace to a steel ... Demand Issues:1. Differential quantity of molten iron sent from blast furnace to steel melting shop.2. Exemption under Notification dated 20-3-1965 for molten iron used in the factory for pig iron manufacture.3. Duty assessment on the difference in molten metal despatched and received.4. Applicability of duty on molten iron under Notification 54/65 dated 20-3-1965.Analysis:1. The case involved a demand-cum-show cause notice issued to the appellants for a differential quantity of molten iron sent from the blast furnace to the steel melting shop during 1978. The appellants attributed the difference to skull formation, spillage, and slag losses during transit, amounting to 0.31%. The Assistant Collector and the Appellate Collector upheld the duty assessed by the Range Officers, leading to the appeal.2. The appellant argued that under a Notification dated 20-3-1965, molten iron used in the production factory for pig iron manufacture was exempt from excess excise duty. The appellant maintained that they followed the 'later the better' principle for duty payment on final products, with no legal obligation to maintain Central Excise registers for intermediate stages. The appellant also presented a circular from 1979 on condonation of losses in iron and steel products, emphasizing the negligible losses and challenging the duty imposition.3. The Revenue contended a difference between dispatched and received molten metal, resulting in a duty demand of Rs. 1,45,000.80. However, the basis for calculating this difference was not clearly established. The Tribunal noted the absence of statutory requirements for maintaining records on molten metal dispatch and questioned the justification for selecting specific stages to determine differences. The appellant's explanation regarding losses due to transit challenges was considered reasonable, especially given the minimal 0.31% loss.4. The Tribunal scrutinized Notification 54/65 dated 20-3-1965, which exempted molten iron used for pig iron manufacture from excise duty. It emphasized that duty liability arises at the pig iron manufacturing stage, requiring proof of clandestine removal of molten metal to bypass the steel melting shop. Since the appellant's records were accepted as the basis for loss calculation, their explanations were deemed credible in the absence of contradictory evidence. The Tribunal concluded that the lower authorities failed to consider crucial aspects, leading to the allowance of the appeal due to the unsustainable nature of the impugned order.