Mangal Sponge & Steel Private Limited vs C.C.E., & S.T., Raipur

Date of Pronouncement: 07.10.2015

Appeal No. E/56010/2014-EX(SM)

(Arising out of OIA No. 204/RPR-1/2014 dated 25/08/2014 passed by the Commissioner (Appeals) Central Excise & Customs, Raipur)

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

Mangal Sponge & Steel Private Limited Appellant

Vs.

C.C.E., & S.T., Raipur Respondent

Appearance:

Present for the Appellant: Shri A.K. Mishra, Advocate

Present for the Respondent: Shri B.B. Sharma, AR

Coram: Honble Ms. Sulekha Beevi C.S., Member (Judicial)

Final Order No.53101/2015

Per: Sulekha Beevi C.S.

The appellant is aggrieved by the impugned order which disallowed the credit on the quantity of input/coal which was short due to washing of coal in Coal Washery.

2. The appellant is engaged in manufacture of Sponge Iron and are also availing Cenvat credit on inputs and capital goods. The appellant received coal which is one of the inputs use in the manufacture of Sponge Iron, from South Eastern Coal Field Limited (SECL). This coal not being directly usable in the manufacture of Sponge Iron, is sent for washing on job work basis. During the process of washing a weight loss of approximately 3% occurs due to removal of impurities like sand & other waste material. The balance quantity of coal is received in the factory and used for manufacture of Sponge Iron. Appellant claimed credit on coal being an input on full quantity on the basis of invoice issued by SECL. Department entertained the view that, the quantity of coal which is lost as waste after washing and not received in the factory is not utilized in or in relation to manufacture of Sponge Iron. That therefore credit is not admissible on that quantity which is lost as waste during the process of washing. Accordingly a show cause notice was issued alleging that for the period from March 2011 to July 2013, the appellant had wrongly availed credit on 73,828.00 MT of coal, because the appellant had received only 71,645.09 MT of coal after process of washing for use in manufacture of finished product. That credit is not admissible on the quantity of 2,182,910 MT which was short after job work of washing. The adjudication finalized in the Order-in-Original which dropped the proceedings. The Department preferred appeal and the Commissioner (Appeals) vide above impugned order allowed the appeal disallowing the credit. Hence this appeal.

3. It is not disputed that washing of coal is an indispensable process for using the coal in the manufacture of Sponge Iron. The objection raised is that only lesser quantity of coal after wash is received in the factory and proportionate credit on such loss cannot be allowed to the appellant. The loss of coal during the process of washing is inevitable and the shortage caused is not in the hands of the appellant.

4. The issue is no longer res integra as the same has been considered and decided in the following judgments:

(i) Tata Motors Ltd. Vs. CCE 2011 (264) ELT 385 (Tri-Kolkatta)

(ii) CCE Vs. Atul Fastners Ltd. 2002 (150) ELT 632 (Tri.-Del.)

(iii) CCE Vs. Bharat Radiators Ltd. 2002 (148) ELT 1101 (Tri.-Mumbai)

(iv) UIC Industries Ltd. Vs. CCE 2002 (149) ELT 745 (Tri.-Kolkatta)

5. Undeniably the quantity of 2,182,910 MT of coal was short due to washing loss which occurred at the job workers end during the process of coal washing. The Boards Circular No. 267/136/87-CX-8, dated 15.1.1988 is with regard to somewhat similar loss of material as waste which occurs during the process of manufacture. The Board has clarified that credit cannot be denied on the ground that part of inputs is contained in the slag and other invisible losses. In Bharat Radiators Ltd case (supra) it was held that denial of credit on burning loss was not sustainable. Since the issue stands settled by the above judgments, following the dictum laid in the above judgments I hold that the denial of credit is unjustified.

6. In the result, the impugned order is set aside and appeal is allowed with consequential reliefs if any.

(Pronounced on 07.10.2015)

(Sulekha Beevi C.S.)

Member (Judicial)

K. Gupta

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