1. Appeal under Section 35B of the Central Excises and Salt Act, 1944 praying that in the circumstances stated therein the Tribunal will be pleased to set aside the order of the Collector of Central Excise (Appeals), Madras in A. No. 183/82(B) C. No. V/68,241/82 dated 2l.10.1982 and allow the benefit under Notification No. 201/79 as amended in respect of duty paid on carbon paste.
2. This appeal arises out of and is directed against the order-in-appeal A. No. 183/82(B) dated 21.10.1982 passed by the Collector of Central Excise (Appeals), Madras, where-by he upheld the order-in-original dated 10.6.1982 passed by the Assistant Collector of Central Excise, Bellary.
3. The dispute in the present case involves interpretation of Central Excise Notification No. 201/79 dated 4.6.1979 as amended by Notification No. 105/82 dated 28.2.1982.
4. The appellants are manufacturers of pig iron and ferrosilicon classifiable under Central Excise Tariff Item. No. 2.3 and 68 respectively. Carbon electrode paste is used as one of the items in the production of these two commodities. The appellants were permitted by the Assistant Collector to avail themselves of Notification No. 201/79 as it stood prior to its amendment by the Notification 105/82 in respect of carbon paste used by them in the production of pig iron and ferrosilicon. However, this permission was revoked consequent on the amendment dated 28.2.1982. The appeal against this decision did not meet with any success. It is the Collector (Appeals)'s order rejecting the appeal against the Assistant Collector's decision that is now under challenge before us.
5. We have heard Shri Chidambaran, authorised representative for the appellants (with Shri K.R. Ramesh, Manager, Product Development) and Shri A. Vijayaraghavan, Departmental Representative for the respondent.
6. Shri Chidambaran submitted that the appellants manufactured pig iron ferro silicon in submerged arc open top furnaces using continuous reduction process. The reductant is carbon supplied jointly by coke and carbon paste for pig iron & charcoal and carbon paste for ferrosilicon.
The carbon paste electrodes serve not merely the function of conducting electricity but also of making available carbon as a reductant. With the help of a technical write-up on the process, Shri K.R. Ramesh, Manager, Product Development of the appellant-firm explained the technical features of the process and urged that carbon paste was indispensable for the process employed by the appellant firm.
7. Shri Chidambaran drew our attention to a decision of the Bombay Bench of the Tribunal in Collector of Central Excise, Nagpur v.Ballarpur Industries Ltd., Chandrapur 1983 ELT 1263 : 1983 ECR 1315D in support of his contention. He further argues that carbon electrode paste was recognised and required to be accounted for as raw material in the returns the appellants submitted to the Iron and Steel Control Authorities. Reliance was also placed on the book 'Electrometallurgy of Steel and Ferroalloys' by F.P. Edneral.
8. Opposing the appeal, Shri Vijayaraghavan, Departmental Representative submitted that a substance, in order to be raw material for the purposes of the notification, should enter into the composition of the final product and be present in the composition. The essential function of carbon paste in the electrode was to let current flow; its function as reductant was incidental. He further submitted that the Bombay Bench decision relied upon by the appellant was with reference to a period prior to the amendment of 28.2.1982 and, therefore, it had no application to the facts of the present case which was of a later period.
9. We have considered the submissions of both the sides. It is seen from the technical write-up furnished by the appellant that the charge received in the furnace shell is melted by the electric current passing through the carbon paste electrodes and a pool of liquid gets collected near the electrode tips, which are called reaction zones. In the reaction zone, chemical reduction takes place and the carbon in the electrode paste which dissolves in the liquid bath of oxides takes part in the reduction. It is stated that the carbon in the carbon paste forms part and parcel of the charge calculations. It is gathered from the memorandum of appeal filed before the Collector (Appeals) that the total quantity of carbonaceous material required for the reduction process is supplied by the coke/charcoal and electrode paste put together and the end product viz., pig iron/ferrosilicon contains a part of carbonaceous material in the form of carbon. The major portion of the reductant including electrode paste is lost during the process in the gaseous form.
10. It is further seen from the book by F.P. Edmeral that the most common reductants in the manufacture of ferro-alloys are carbon, silicon and aluminium. (Page 75).
11. As against the above technical material, the respondent has not furnished any material to controvert the submissions. The only argument put forth is that the essential function of the carbon paste in the electrode is electrical and not as reductant.
12. The expression "raw material" has not been defined in the notification. One has therefore to turn to its ordinary meaning of the expression. Webster's Third New International Dictionary gives the meaning as material available, suitable or required for manufacture, development, training or other finished process but not yet so used Material whether crude or processed that can be converted by manufacture, processing or combination into a new and useful product.
13. The subject notification as it stood prior to its amendment exempted all excisable goods... in the manufacture of which any goods falling under Item 68 of the First Schedule had been used from so much of duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs. The amending notification of 1982 substituted the words "and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt act, 1944(1 of 1944) (hereinafter referred as "the inputs") "has been used" with the words and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) have been used as raw material or component parts (hereinafter referred as "the inputs"). It is clear that the amendment has brought out a qualitative change in the notification. The condition now required to be fulfilled is that the inputs must be used as a raw material or component part. As we have noted, there is no definition of raw material in the notification. What constitutes raw material will depend upon the facts and circumstances of each case. The proposition that a raw material must be physically present in the final product cannot be taken as an inevitable and invariable rule. If that were so, in circumstances where a given raw material is definitely present in the composition of the final product, but a portion of the raw material input is lost during the process, the question would arise whether only that part of the raw material which is physically present in the composition of the finished product would be treated as raw material for the purposes of the notification and that portion which is lost in the process not so treated. Again, there would be instances where a solvent is used for the extraction of certain substances and it is recovered after removal of the extracted substance by distillation or by other methods. The solvent would not be physically present in the extracted substance or may be present in minute quantities. Would it be correct to say that, in the circumstances the solvent is not a raw material used in the manufacture of the extracted substance It is therefore that we consider that no hard and fast rule can be observed in this matter in the absence of any definition of the expression "raw material" in the notification itself.
14. The decision reported in 1983 ELT 1263 : 1983 ECR 13I5D is not relevant to the facts of the present case since it was with reference to a period prior to the amendment of the notification, 15. Having regard to the submissions made before us by the appellants which remain uncontroverted, we are of the view that the carbon paste used by the appellants in the manufacture of pig iron and ferro-silicon was entitled to the benefit of notification No. 201/79. We accordingly allow the appeal and direct that the consequential relief shall be granted by the concerned Central Excise Authorities to the appellant within 3 months from the date of communication of this order.