ORDER
V.K. Ashtana, Member (T)
1. E/274/90 is a Revenue appeal against Order-in-Appeal No. 21/90 (BM) dated 23-2-1990 passed by Collector (Appeals) wherein it was held that Copper Flexible is an ‘input’ under Modvat scheme on the grounds that :-
(a) it is essential for the manufacture of Caustic Soda &
(b) it is gradually used-up in this process.
2. E/255/90 is another Revenue appeal against Order-in-Appeal No. 22/90-(BM), dated 23-2-1990 passed by Collector (Appeals) on the same issue.
3. These were therefore heard together, and by common consent, are being considered by this common order.
4. Briefly, the item Copper Flexible are used in the manufacture of Caustic Soda by Electrolysis as follows :-
“In the electrolytic cell the electrolyte brine is subjected to electrolysis by the application of an electric current, which flows from the metal anode to the flowing mercury cathode. The anode and the cathode are kept at a distance apart which is highly critical for the efficient electrolysis of the brine. The gap between the Anode and Cathode has to be adjusted mechanically frequently so that the electrolysis is efficient and the cost of electric power which is the largest single item of operating cost is reduced. For the economic and efficient electrolysis of brine to produce caustic soda as well as to facilitate the mechanical adjustment of the gap between the Anode and Cathode, the appellants use ‘Copper Flexibles’ which connect between the Anode and the bus-bar through which the electric supply is received at the electrolytic cell. The copper flexibles are also utilised in short circuiting so as to cut out a cell from others whenever severe problems arise in the electrolysis taking place in that cell.”
5. Heard ld. JDR Shri S. Kannan of appellant-Revenue and ld. Advocate Shri C.T.A. Pillai for respondents.
6. Learned JDR submits that the impugned orders have clearly erred in holding it on par with an electrode which may get consumed slowly in the electrolytic process. On the contrary, the copper flexible is merely connected to the metallic anode for purpose of passing current, including emergent short circuiting of a cell going out of control. Therefore, it is not even an anode, but a mere conductor, hence clearly an appliance. He further submits that vide Reference Order No. 58/97, dated 9-4-1997 an exactly similar matter was referred to Hon’ble High Court of Kerala because this Tribunal had noticed divergent decisions on the subject. This divergence arose because while in Final Order No. 328/96 in the case of M/s. Binani Zinc, the Tribunal had allowed Modvat credit to copper aluminium transaction joints as they were welded to anode and hence were regarded as its extension, in the case of Final Order No. 594/96, dated 15-4-1996, the same Tribunal, in the case of Indian Aluminium Co. had disallowed the Modvat credit to a similar conductor on the ground that it was merely a link between the electrolytic bath and the electricity transmission mechanism (bus bar) and therefore not an electrode.
7. Learned Advocate submits that a Departmental Circular & Belgaum Commissionerate Trade Notice of 1990 is not binding on this Tribunal & has been upset by subsequent decisions. He cited decision of Tribunal in the case of Cominco Binani as reported in 1990 (48) E.L.T. 283 (Tribunal) wherein anodes used in manufacture of Zinc were held eligible for Modvat credit. Similarly, he cited the following decisions in which Titanium anodes etc. were held eligible:
1989 (41) E.L.T. 424 (Tribunal) – Gujarat Alkalies
1990 (50) E.L.T. 172 (Tribunal) – Travancore Cochin Chemicals
1994 (72) E.L.T. 739.
He further submitted that in 1997 (93) E.L.T. 407 (Tribunal) (Andaman Timber) it was held that sheet for pressing plywood is eligible and is not an appliance. He therefore prayed for rejection of these Revenue appeals.
8. We have carefully considered the arguments on both sides as well as the records of the case. We find that it is not disputed that the said copper flexible are required as conductors of electricity in an electroylic cell used for manufacture of caustic soda. The exact role played by it is also not in dispute. The only moot point for consideration is whether it can be considered as an integral part of an electrode, or merely an electrical conductor, though conducting current to the anode. It is on record that the cathode is maintained in a fixed position but the anode requires to be moved in relation to the cathode i.e. the distance between them is to be continuously adjusted mechanically for optimum electrolytic efficiency/productivity of the cell. This item-copper flexible affords such a flexible electrical connection between the bus-bar and the anode. We note that in such a situation, the current flows from anode to cathode, through the brine. We also find that over a long period of time, the said copper flexible either corrodes and or suffers from reduced conductivity and then needs to be replaced by a new one, as a normal periodic maintenance procedure. Therefore, it would not be correct to say that it gets “consumed” in the electrolytic process unlike an welding electrode which gets deposited on the welded surface. We further find that the said copper flexible is also used for emergency short circuiting of the cell. This short circuiting can be done in two ways, at least logically. Either one of the electrodes is disconnected from the system by taking it physically out of the bath (cell) and connecting it with the other electrode; or by diverting the electric current so that it does not flow through the brine. In this case, it is clear from records that instead of removing either anode or cathode, they are short-circuited by using this copper flexible (i.e. cathode or anode are joined through the flexible), thereby the flow of current is diverted along this route due to least resistance compared to the resistance offered by the brine, and the electrolysis process temporarily comes tea halt or is controlled.
9. We find that in both these uses, one end of the said copper flexible is connected to the anode. It is not material whether such a connection is made by welding or any other method of fastening. What is material is that we find that the copper flexible is not used as an electrode, particularly as an anode. This is for two reasons. Firstly, it is used to connect the anode to the power supply mechanism (bus bar). This use as such a connector between bus bar and anode is clearly a function distinct from that of an anode. An anode would necessarily dip inside the bath. This connector remains out of the bath and the cell. Secondly, this is also used to short circuit the anode and the cathode. Only something distinct from both these can short circuit them. We, therefore, find that on both these counts, this item is not an anode. If it is not an anode, then all the case-laws cited and which allow Modvat credit on anodes, stand distinguished on facts. As against these, the ratio of this Tribunals order in the case of Indian Aluminium clearly applies here. The case-law regarding sheet used for pressing plywood is also with respect to a different manufacturing process.
10. This still leaves the question of whether the copper flexible becomes an extension of the anode because it is welded to is or not, unanswered. But with great respect, we are unable to agree with the views of the Hon’ble Tribunal in the Order No. 388/96 in the case of Binani Zinc. Therein it was held that as the conductor was welded to the anode, it became a part of the anode. This assumption we cannot accept for the simple reason that some conductor has always to be somehow fastened to both the anode and the cathode. These in turn are to be joined with the electrical circuit, so that a clean electrical circuit is formed and a current can flow across the cell bath. In this case, the plant uses a flexible conductor, i.e. copper flexible. The manner of fastening i.e. welding or otherwise, is immaterial. But such conductor can never become a part of either electrode because they bridge the gap in the electrical circuit but do not themselves act as an electrode. Because, if mere fastening to them would make them a part of an electrode, then the bus-bar, which is ultimately also connected to the anode should be regarded as a part of an anode too, a totally unsound preposition. Secondly, since it is also used in short circuiting the two electrodes, we find ourselves unable to accept it is as anything other than a mere electrical conductor of a flexible nature, albeit an uninsulated one.
11. We further find that as this question of nature of role played by the copper flexible is one of fact, therefore no point of law is involved in this case. Therefore, there is no need for us to await a decision on the reference on a point of law earlier made to the Hon’ble High Court of Kerala and submitted by learned JDR.
12. In view of these discussions we are clearly of the opinion that Modvat credit is not available on copper flexible, the same not being an electrode, but a mere electrical connector and therefore an ‘appliance’. We, therefore, set aside the impugned order-in-appeal and the 2 appeals of Revenue accordingly are allowed.