2010 (6) TMI 436 - AT - Central Excise

100% EOU DTA clearances - exemption to finished products from indigenous raw material - From the process as set out by the assessees, it is clear that they are correct in their contention that steel grits (abrasive powder) goes along with capital goods and not with raw materials. Since the imported consumables are not used as raw materials, we accept that the assessees were using only indigenous raw materials in the manufacture of their final products. Therefore, there is no reason why the benefit of the notification should not be extended to them and accordingly we extend the same.

Summary

Issues: Disallowance of benefit under Notification No. 8/97-C.E. for using imported consumables alongside indigenous raw materials in manufacturing process.

Analysis:
1. The Appellate Tribunal, Chennai, addressed the issue of disallowing the benefit of Notification No. 8/97-C.E., dated 1-3-97, which grants exemption to finished products, rejects, waste, or scrap produced in a 100% EOU or a free trade zone wholly from raw materials manufactured in India. The authorities disallowed the benefit due to the use of imported consumables alongside indigenous raw materials.

2. The Tribunal considered the detailed explanation provided by the assessees regarding the use of steel grits in the manufacturing process. The steel grits, being angular granules used for cutting granite, were mixed with limestone powder to form a slurry poured over blocks to be sawn. The steel grits, after being collected, were recycled until fully consumed during cutting operations.

3. The Tribunal acknowledged that the imported steel grits were used as a part of the machinery for cutting granite and not as raw materials. As the process of manufacture using only indigenous raw materials was not disputed, the Tribunal concluded that the benefit of the notification should be extended to the assessees. Therefore, the Tribunal accepted that the assessees were using only indigenous raw materials in their manufacturing process, justifying the extension of the notification's benefit.

4. Consequently, the Appellate Tribunal set aside the impugned order disallowing the benefit and allowed the appeal in favor of the assessees. The Tribunal's decision was based on the understanding that the imported consumables, specifically steel grits, were integral to the machinery used for cutting operations and not considered raw materials in the manufacturing process.