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Ferro Alloys Corporation Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1985)(22)ELT820Tri(Chennai)
AppellantFerro Alloys Corporation Ltd.
RespondentCollector of Central Excise
Excerpt:
.....to avail proforma credit on carbon paste and refractory materials used in the manufacture of ferro alloys.2. this appeal coming up for orders upon perusing the records and upon hearing the arguments of s/shri srinivasamurthy and chidambaram, advocates, for the appellant and upon hearing the arguments of shri s.k. choudhury, senior departmental representative for the respondent, the tribunal makes the following order.3. a revision application filed before the government of india against the order of the appellate collector of central excise, madras, referred to supra has been transferred to the tribunal in terms of section 35p of the central excises and salt act, 1944, for being treated as an appeal. by his order, the appellate collector upheld the order of the assistant collector.....
Judgment:
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 No. 1/82(G) of the Appellate Collector of Central Excise, Madras, dated 8-1-1982 and permit the appellants to avail proforma credit on carbon paste and refractory materials used in the manufacture of ferro alloys.

2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of S/Shri Srinivasamurthy and Chidambaram, Advocates, for the appellant and upon hearing the arguments of Shri S.K. Choudhury, Senior Departmental Representative for the respondent, the Tribunal makes the following Order.

3. A revision application filed before the Government of India against the order of the Appellate Collector of Central Excise, Madras, referred to supra has been transferred to the Tribunal in terms of Section 35P of the Central Excises and Salt Act, 1944, for being treated as an appeal. By his order, the Appellate Collector upheld the Order of the Assistant Collector of Central Excise, Division II, Visakhapatnam, dated 21-4-1981 in C. No. V/68/ 30/217/80, rejecting the claim of the appellants for availing proforma credit under Rule 56A of the Central Excise Rules, 1944 on refractory bricks and carbon paste claimed to have been used in the manufacture of ferro alloys, a product falling under Item 68-CET. The Assistant Collector held that refractory bricks and carbon paste are used in ferro alloys not as raw materials or components but only as input materials. The Appellate Collector in his order has observed that these two materials do not undergo a change in the bringing into being of the finished product or more precisely in the manufacture of ferro alloys and hence provisions of Rule 56A will not be applicable.

4. Before us, at the outset the advocate for the appellant referred to the order of this Bench, dated 21-3-1984 in the case of Sandhur Manganese and Iron Ore Limited, Yeshwantnagar v. Collector of Central Excise, Bangalore [appeal No. ED(MAS) 368/83] wherein for purposes of Notification No. 201/79, carbon paste has been treated as a raw material in the production of pig iron and ferro silicon. Rule 56A only refers to material and component parts as the Tribunal has accepted carbon paste as raw material for the notification, it should certainly be considered as raw material in the manufacture of ferro alloys for purposes of Rule 56A.5. Continuing, the advocate submitted that the following refractory bricks are used : They are used in the furnace and ladles and are selected with reference to their chemical composition as well as physical properties. The use of any particular brick is also conditioned to safeguard against contamination of the end-products. They get used up and have to be renewed once in every two or three days. In the process of manufacture, very high temperatures are reached and the bricks used for lining the furnace and ladles have been selected because of their ability to withstand these high temperatures as well.

6. So far as the carbon paste is concerned, the advocate referred to the decision of this Bench in the case of Sandhur Manganese and Iron Ores Limited, referred to above. As the material on which the earlier decision was reached was not fully on record and the order itself is a somewhat brief one, we wanted to know the details of use of carbon paste, The advocate explained that is the manufacture of ferro alloys they use what is called continuous selfbaking electrodes. These are prepared by filling the following mixture into a mild steel casing of cylindrical shape : The mixture softens at around 80 to 120C, melts into a fluid mass at 120 to 300C and thereafter transforms itself into a solid mass due to the action of the binder. This process is called backing. During the operation, the baked electrode extending below the contact clamps is submerged inside the charge upto 1.2 to 1.8 metre in depth, the temperature at the tip of electrode being 2500C. Referring to a book, 'Production of Ferro Alloys' by M. Riss and Y. Khodorovsky, he tsubmitted that at p. 111, it is stated that half of the consumed electrode paste goes for the reduction of oxides. In this view, he claimed that carbon paste is also entitled to be considered as raw material for the manufacture of ferro alloys.

7. The SDR, on the other hard, suggested that the earlier decision of the Tribunal would require reconsideration in the light of the actual use of carbon paste. What is described by the advocate for the appellants is the production or manufacture of baked electrode. The carbon paste itself is used to improve electrical contact between carbon and the electrode. Carbon itself is in an amorphous form inside the electrode. Electrode is merely a means of conducting electricity (power) into the mass for purposes of reduction or ore. Hence carbon paste cannot be considered as raw material in the manufacture of ferro alloys.

8. In so far as bricks are concerned, the SDR urged that they form linings of the furnace and ladles. The fact that they get used up in two or three days does not by itself make them raw materials. Due to the high temperatures involved and the abrasive quality of the material handles naturally there will be wastage. The bricks by themselves do not take part in any of the essential reactions that result in the production of ferro alloys.

9. In reply, the advocate for the appellants explained that what is under consideration is a mixture referred to in para 6 above and not the one used to improve electrical contact between carbon ripple and the electrode.

10. We have carefully considered the submissions of both sides. The carbon paste, as clarified by the advocate for the appellants, is a mixture fed into a cylindrical tube at the time of backing of electrodes. In the process of backing of electrodes, the mixture fed into a cylindrical casing of mild steel softens, melts and turns into a solid mass, the whole operation being termed baking of the electrodes.

It is the baked electrodes that makes contact with the mass of ore. The primary purpose of an electrode is conveyance of electricity from a main source to the point where it is needed. It is, thus, no better than, say, an electrode used in a cinema projecting machinery in a carbon arclamp. In the essential process of reduction, carbon in the form of 'leco' is used. It came up during the course of hearing that about 20 to 22 Kgs. of carbon paste are used per ton of finished ferro alloys. (It is 65 to 70 Kgs. per ton for ferro silicon). Considering the large availability of carbon in the form of 'leco' coal and coke used by this manufacturer, it is difficult to accept that a very small quantity of carbon contained in the carbon electrode which itself serves the primary purpose of conducting electricity into the untreated molten mass, as a source of carbon for purposes of reduction of the ore. No clear indication is available either in the order of the Tribunal dated 21-3-1984 or the material placed before it at the time of hearing of the appeal as to the nature of the carbon paste based on which the decision was taken in March 1984. We would, therefore, take it that decision does not in terms apply to the facts of the present case. In the circumstances of this case, we consider that the mixture referred to in para 6 above (and referred to as carbon paste in these proceedings), is not raw material used in the manufacture of ferro alloys.

11. The bricks are used to line the furnace and ladles. Their principal function is withstanding of heat of very high order that is needed and produced in the course of preparation of ferro alloys. As rightly pointed out by the SDR, their being used up in two to three days could be due to their being in contact with highly abrasive materials at high, temperatures. In the write-up furnished during the course of hearing, it is clearly set out that in choosing a particular type of brick out of four varieties, caution is taken to safeguard agains combination of the end-product. This would imply that whatever is contained in the brick is not intended to form part of the finished product. Hence in this case also we do not consider that bricks form a raw material in the manufacture of ferro alloys or ferro silicon. In the result the appeal is dismissed.


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