TaxTMI 
TaxTMI 
2003 (1) TMI 332
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....roduct (i.e.) Iron Ore Pellets emerge from the furnace, the pellets in red hot condition are passed over a conveyor system to the open stockyard which is situated far away; even before they reach the stockyard the weight of the 'dry pellets' is ascertained by an automatic weighing system by means of a weightometer fixed to the conveyor belt and the weight so ascertained is accurately recorded in the RG-1 account and duly accounted for. The pellets recorded at this stage do not contain any water/moisture. Immediately after the weight is recorded by the weightometer, water is sprinkled on the pellets to reduce dust and escape of other fine particulate into the atmosphere in compliance with the statutory requirements of the pollution control board and stored in the open are exposed to vagaries of atmosphere and during the monsoon are fully drenched and soaked in rainwater. Water required to be sprinkled while transferring the pellets to the ship over a conveyor and after loading into the ship to comply with the requirement of the Pollution Control Board. 4. (a) The appellant commenced trial production during November 1996 and initially all the dispatches made by him up to ....
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....OTAL 32,78,673.300 45,412.514 6,39,943.540 October '99 1,09,146.000 20,776.420 33,343.540 November '99 47,089.000 - 1,09,354.130 December '99 1,73,163.000 - 64,772.400 January, 2000 2,23,756.000 - - February, 2000 1,56,125.000 - 87,303.150 TOTAL 7,09,279.000 20,766.420 2,94,773.220 Grand Total 39,87,952.300 66,188.734 9,34,716.760 During the material period, a quantity of 39,87,952.300 MTs was cleared for captive consumption as against a clearance of 66,188.734 MTs to outside buyers and 9,34,716.760 MTs cleared for exports. The department has not raised any objection regarding the quantity/ value of goods cleared for export. (d) While the practice of charging the price based on the dry weight was going on, the Commissioner of Central Excise, Visakhapatnam issued a Show Cause Notice dtd. 13-12-99 proposing demand of differential duty of an amount of Rs. 60,00,428/- being the duty payable on the excess quantity of Iron Ore Pellets alleged to have been cleared in the guise of moisture during the period 11-8-97 to 30-9-99. The notice alleged that excess weight of Iron Ore Pellets were cleared in the guise of moisture withou....
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.... The reasons advanced for non-deduction of 'moisture' prior to 11-8-97 when they shifted to duty payment on 'dry weight' were lacking conviction, inasmuch as the appellants, a major corporate entity would be not unaware of application of international norms prior to 11-8-97 when they themselves have paid duty on the weights with the 'moisture' content and no professionally managed company would pay extra duty on 'moisture' weight and the norms should remain constant, whether for trial production or otherwise. Even before 11-8-97 bulk of production at Visakhapatnam plant was meant for captive consumption at Hazira and other documentary evidence clearly established that prior to 11-8-97 quantity ascertained by weight was done without deduction of any 'moisture' content. (ii) Chapter 26 of Central Excise Tariff Act, 1985 and a perusal of Heading 26.01 thereunder would indicate that it is only for manganese ores and concentrates falling under Ch. Heading 26.02 dry weight calculations are mentioned and not for Iron-ore pellets and concentrates. Therefore, dry weight calculations were not correct for this duty under consideration. (iii) 'Moistu....
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....efore they reach the stock yard, the weight of the cooled dry pellets is ascertained by an automatic weighing system fixed to the conveyor belt and the weight so ascertained is accurately recorded in RG-1 Account and duly accounted for. Revenue has not brought out anything on record in the impugned order or in the submissions made before us that this factual position is in any way impugned. When RG-1 Accounts are maintained of the 'dry weight' of pellets and that is not being questioned, then we find that no different weight can be reckoned especially 'moist weight' ascertained by draft survey methods to consider the quantity removed. The quantity removed in the 'moist' condition is unquestionably excess than the 'dry weight' quantity recorded in the RG-1. If these 'moist' quantities are considered as the quantities of pellets actually removed from the premises, then the RG-1 would definitely result into a negative balance of 'stock of ready goods produced in store'. Since each removal as per Rule 53 and 49 and 173G has to be accounted in the recorded production balance in the RG-1, being maintained. RG-1 is an essential and important account prescribed. It is intended to prevent c....
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....Transport Requirement and not that of fully manufactured product. Therefore, we cannot find anything amiss in the goods being accounted in the RG-1 on 'dry weight' basis and subsequent removals even though any moist condition being converted to dry weight basis to effect and pay duty thereon. Nothing amiss has been arrived at on this 'dry weight' accounting maintained. (c) The pleading of the appellants is appreciated inasmuch as free moisture loss is passed on the certificate of analysis issued by an independent 'assesee/compere' fixed by the buyers. A perusal of various purchase orders placed on the appellant by national and international buyers, placed before us which are said to have been shown to the adjudicating authority, but not considered by him, they prescribed free moisture losses 2-4% with their increasing to 4-6% during monsoon season. These documents also show how the dry basis is to be arrived at the percentage of Fe content required along with other materials and also prescribed for relating the wet moist weight as per draft survey reports. There is force in the pleadings made before us that the moistening of the pellets is a req....
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....etite and other finely ground iron ores for use as pigments (Chapter 32)."                        (Underlining supplied) Therefore, the adjudicator's finding that wet or dry weights are not relevant for Iron ore and concentrates under 26.01 are not upheld by us. (f) As regards Commissioner's finding that the appellant being a corporate entity run by professional management would not absorb huge losses by paying extra duties on moisture weights recorded due to adoption of wrong practice earlier to 11-8-97 when the appellants were paying duty on the wet basis weight. It is found, he has failed to observe that was not a pure commercial transaction entered; inasmuch as the removals were trial production removal to their other unit of Hazira from Visakhapatnam and whatever duties they would pay, Hazira plant would obtain the Modvat credit. Similarly, the non-recording of the dry weights at Hazira and recording of the wet basis practice at Hazira will not result in coming to a conclusion that excess goods have been delivered. The allega....
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....moval' for purposes of weaving would be 'issue out' or 'removal' of unsized yarn. Once this deemed removal takes place, the unsized yarn is first sized, the process being the first-process in the many processes, which ultimately, results in weaving being completed and cloth being fabricated."                  Emphasis Supplied In the present case, substituting the words 'sized or unsized yarns' with the words 'moist or dry pellets' and considering the fact that 'moistening' is relevant only for transportation, and not for manufacture of the Iron ore pellets, in question, and applying the ratio of the above said decision, recovery of duty would be attracted, the moment the 'dry pellets' are shifted on the conveyor after spraying water on their onward journey to Hazira by sea for further manufacture of steel, no reason to demand duty on moisture content can therefore be arrived at. (h) The appellants have relied upon the following case laws : - (i) Geep Industrial Syndicate Ltd. v. Collector - 1999 (114) E.L.T. 850 (Trib.) (ii) &nb....