1. Appeals under Section 35-B of the Central Excises and Salt Act, 1944 praying that in the circumstances stated therein, the Tribunal will be pleased to, (i) grant proforma credit facility in respect of three items viz.
Alfloc-11, Alfloc-31 and Hydrazine Hydrate, disallowed pursuant to order No. 191/83 (H) dated 30-7-1983 of the Collector of Central Excise (Appeals), Madras; (in appeal at S1. No. 1) and (ii) set aside the order of the Collector of Central Excise (Appeals), Madras, dated 5-4-1984 in No. 31/84 (H) (D), in Appeal at SI. No. 2 above.
2. These appeals coming up for orders upon perusing the records and upon hearing the arguments of Shri P.N. Menon, Representative and Jogayya Sarma, Advocate for the appellants and upon hearing the arguments of Shri J.M.K. Sekhar, Senior Departmental Representative for the respondent, the Tribunal makes the following : 3. As the two appeals though directed against two different orders of the Collector of Central Excise (Appeals), Madras namely, No. 191/83 (B) dated 30-7-1983 and No. 31/84 (H)(D) dated 5-4-1984 respectively, arise out of from a single order (No. 1/83 dated 21-2-1983) of the Superintendent of Central Excise, Kurnool III Range, the two appeals are being dealt with together.
4. M/s. Sree Rayalaseema Paper Mills Ltd., the appellants herein, were availing of Proforma credit in respect of the following 13 items :- After issuing a notice as to why the credit accrued from 1-3-1982 to 31-7-1982 and the credit pertaining to balance of stock of raw material as on 27-2-1982 and 28-2-1982 remaining in the factory should not be disallowed and the amount recovered in terms of provisions of paras 4 and 10 of the Appendix to the Notification No. 201/79 dated 4-6-1979 as amended by order No. 1/83 dated 21-2-1983 the Superintendent disallowed the credit in respect of three items namely, (i) Alfloc 11, (ii) Alfloc 31 and (iii) Hydrazine Hydrate; but permitted the availing of credit in respect of the other items. The appellants went in appeal to the Collector (Appeals), Madras in respect of the three items disallowed.
That Collector following a decision in the case of Andhra Pradesh Paper Mills Ltd., Rajahmundry and Ors. [order-in-appeal No. 84/83 (G) dated 31-5-1983] upheld the order of the Superintendent and rejected the appeal vide his order dated 30-7-1983 referred to supra (now dealt in No. 399/83).
5. On a direction from the Collector of Central Excise, Hyderabad under Section 35E(2) of the Central Excises and Salt Act, 1944 the Assistant Collector of Central Excise, Kurnool filed an appeal dated 30-11-1983 against the order of the Superintendent allowing the credit in respect of other nine items. By order No. 31/84 (H) (D) dated 5-4-1984 the Collector (Appeals) allowed the appeal of the Assistant Collector of Central Excise, Kurnool, and set aside the order of the Superintendent, Kurnool, III Range in respect of the other nine items (now dealt in appeal No. 157/84). He also directed the mills to pay back the credit of duty wrongly taken by them under the impugned order either by adjustment in the credit account, or in the account current or in cash.
Against both these orders of the Collector (Appeals) (Nos. 191/83 dated 30-7-1983 and 31/84 dated 5-4-1984) the appellants have come up in appeal to the Tribunal. The relevant appeals being 399/83 and 157/84 respectively.
6. The advocate for the appellants referred to the interpretation of the term 'raw material' as contained in the following decisions of the Supreme Court and High Court and urge that all the items are raw materials in the manufacture of paper :- Continuing he explained that (1) Alfloc 11 is an Alkaline Phosphate used to maintain a higher PH value and remove minerals to avoid the formation of scales in boilers; (2) Alfloc 31 is basically sodium sulphate with some other chemicals; it serves as a remover of oxygen as an aid against boiler corrosion (3) Hydrazine Hydrate serves the same purpose as Alfloc 31 and (4) Anthraquinone is used in the digester for the delignification of the pulp. In this process a sulphidity of 20% has to be maintained; addition of Anthraquinone helps to make up for any minor variation in sulphidity. He also found fault with the Collector (Appeals) for directing the collection of money for which credit has been taken without verifying that a show cause notice has to be issued within the period of limitation prescribed under Section 11A; in the present proceedings no such notice had been issued by any departmental authority.
7. In reply, following decision of this Tribunal in the case of 'Seshasayee Paper and Boards Ltd. v. Collector of Central Excise, Coimbatore' - Appeal No. ED (MAS) 58/84 dated 16-1-1984 was cited by Sr. D.R.--Sr. D.R. accepted the plea on behalf of the appellant that the following items can be granted the benefit of Notification No.201/79 : (1) Ferric Alum (used for paper manufacture but not in the purification of water) In respect of Alfloc 11, Alfloc 31 and Hydrazine Hydrate, he pointed out that they are merely boiler chemicals concerned to keep the boiler in good order rather than used directly in the manufacture of pulp or paper. It should not therefore qualify as a raw material for use in the manufacture of paper and paper board.
8. Following our decision in the 'Seshasayee Paper and Board' case 1985 (21) E.L.T. 193 (Tri.) we agree that the following items be treated as raw materials in the manufacture of paper : As we have pointed out in that order this Bench has already considered in some details the meaning of the term 'raw materials' as used in the Notification No. 201/79 and held that it has to be interpreted in the circumstances of each case in the absence of any acceptable or useful definition of the term either in the dictionary or in the technical literature. We have also held that in the case of "Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad" [Appeal ED (MAS) 397/83 dated 18-1-1985] that Sodium Sulphate used in the manufacture of paper is a raw material. Following the rationale of the decision in that case, we consider that sodium sulphate is also entitled to the benefit of Notification No. 201/79. We also note that in the case of Seshasayee Paper and Board case we have already allowed the benefit of notification to sodium sulphide lye. Accordingly sodium sulphide is also allowed the benefit of the notification.
9. In so far as Anthraquinone is concerned it is used in the digester for delignification for the purification of pulp and is an aid in maintaining sulphidity of pulp; the material is an essential chemical in the manufacture of paper. This too is entitled to the benefit of the notification. Sulphamic Acid is claimed to be used for bleaching pulp either in the chlorination of air while adding sodium hydrochloride. It is used for avoiding the degradation of properties found that is to retain the viscosity of the pulp. Acetic Acid is said to be used to dissolve dyes in stock preparation section which is added to pulp.
Obviously these are essential chemicals in the processing of pulp or paper and hence would be entitled to the benefit of the notification.
10. So far as Alfloc 11, Alfloc 31 and Hydrazine Hydrate are concerned, it is noted that they are used for avoiding scaling of in boiler or boiler corrosion. Thus it is essentially a maintenance chemical relatable to the boiler than to the product manufactured. In our view these will not qualify as raw materials in the manufacture of paper board for the benefit of the notification.
11. As regards burnt lime, it is found to be used firstly in the soda recovery cycle to convert sodium carbonate in the green liquor to sodium hydroxide. It is thus a chemical for the recovery of sodium hydroxide and is not a raw material for the manufacture of pulp.
Secondly, it is used in the preparation of calcium hydrochlorite--a bleaching agent-using chlorine. It is thus not a raw material in the manufacture of pulp but one for the manufacture of a bleaching chemical. In either case, it is not entitled to the benefit of Notification No. 201/79.
12. Summing up, we find that out of the 13 products which form the subject matter of the order of the Superintendent benefit of Notification No. 201/79 may be allowed in respect of Sodium Sulphate; Ferric Alum; Non-ferric Alum; Sodium Sulphide; Acetic Acid; Rosin; Depsanil 'V'; Anthraquinone and Sulphamic Acid but we deny the benefit in respect of Alfloc 11, Alfloc 31 and Hydrazine Hydrate and burnt lime.
13. A point has been made that the Collector's order dated 5-4-1984 directing the payment of the credit either by adjustment in RG 23 or by cash payment is not maintainable as no demand for payment of duty had been raised within the period set out in Section 11A of the Act. What we ordered deals with the question of money taken as wrong credit rather than a demand for payment of duty short levied or erroneously refunded. Para 4 of Appendix to the Notification No. 201/79 clearly lays down that if credit of duty paid on inputs has been taken wrongly, the credit so taken may be disallowed and the amount so disallowed shall be adjusted in the credit account or the account current or by a cash recovery. Hence the plea on behalf of the appellant is not maintainable in law.
14. Thus the direction of the Collector in so far as it related to the four items for which we have disallowed the benefit of Notification No.201 /79 is correct in law.
15. In the result the appeal No. 157/84 insofar as it relates to the following nine items, alone is allowed : The other appeal No. 399/83 relating to Alfloc 11; Alfloc 31 and Hydrazine Hydrate is accordingly dismissed.