2011 (7) TMI 426 - AT - Central Excise

Demand, interest and penalty - 100% EOU - denying the benefit of exemption in terms of Notification No.8/97-CE dt. 1.3.97 on the ground of use of imported wax in the yarn, as the exemption was available only to goods manufactured wholly from the raw materials produced or manufactured in India - As per the decision of Hon ble Karnataka High Court as in the case of COMMISSIONER OF C. EX., BELGAUM Versus FORBES GOKAK LTD. 2009 -TMI - 76258 - CESTAT, BANGALORE holding that wax cannot be considered as raw material but as consumable - Held that - the benefit of the exemption under the relevant notification cannot be disallowed on the ground of use of imported wax as wax has already been held by the Hon ble High Court to be a consumable and not a raw material - Decided in favour of assessee.

Summary

Issues:
- Denial of exemption on hosiery cotton yarn due to the use of imported wax
- Interpretation of Notification No.8/97-CE regarding exemption eligibility
- Comparison with similar cases and judicial precedents on the classification of wax as raw material or consumable

The judgment by the Appellate Tribunal CESTAT, Chennai, involved the issue of confirming a demand on hosiery cotton yarn cleared by the assessees to DTA, denying the exemption under Notification No.8/97-CE due to the use of imported wax in the yarn. The Tribunal analyzed the process of waxing the yarn, highlighting that waxing is essential to maintain the co-efficient of friction between yarn and metal, preventing yarn breaks. The Tribunal referred to a case where the Karnataka High Court classified wax as a consumable, not a raw material, extending the benefit of exemption. Despite the respondent's reliance on remand orders from other cases, the Tribunal followed the Karnataka High Court's decision, emphasizing that wax is a consumable, not a raw material, and allowed the appeal, setting aside the impugned order. The judgment was pronounced on 5.7.2011.

In this case, the main issue revolved around the interpretation of Notification No.8/97-CE in relation to the eligibility for exemption on hosiery cotton yarn cleared to DTA. The Tribunal examined the process of waxing the yarn and its necessity to prevent yarn breaks, emphasizing that wax is considered a consumable rather than a raw material. By citing a previous decision by the Karnataka High Court, the Tribunal established that the benefit of exemption cannot be denied based on the use of imported wax. This analysis showcases the importance of judicial precedents in interpreting and applying tax laws to specific cases, ensuring consistency and fairness in decision-making.

The judgment also addressed the comparison with similar cases and judicial precedents concerning the classification of wax as either a raw material or a consumable. By referencing the decision of the Karnataka High Court, which treated wax as a consumable, the Tribunal established a clear precedent for the present case. Despite the respondent's attempt to rely on remand orders from other cases, the Tribunal emphasized the direct decision of the Karnataka High Court on the classification of wax. This comparison with previous cases highlights the significance of legal consistency and the binding nature of established judicial interpretations in determining the outcome of tax-related disputes.