2015 (10) TMI 441 - SC - Central Excise

100% EOU - Benefit of Notification No. 8/97-CE dated 01.03.1997 - Concessional rate of duty - As per the Revenue, Vanadium Pentoxide which is the material used for the manufacture of the products in question is the raw material and since the aforesaid components of raw material are imported, the assessee would not be entitled to the benefit of the aforesaid notifications. Held that - Vanadium Pentoxide, while influencing and accelerating the chemical reactions, itself remains uninfluenced and unaltered and retains its independent character. It is also not in dispute that it remains outside the product and does not form part of the product. This has been accepted even by the Commissioner and finding to this effect is given by stating that it is not directly consumed in the process of manufacturing and normal life of the catalyst is 36 months, after which this catalyst has to be replaced by a new one. - Catalyst which retains its character, remains outside the end product, remains uninfluenced and unaltered cannot be treated as raw material. - No violation with the approach of the Tribunal in granting the benefit of the Notifications to the assessee herein - Decided against Revenue.

Summary

Issues:
Interpretation of the term 'raw material' for availing benefits under Notifications No. 8/97-CE and 23/03-CE.

Analysis:
The judgment revolved around determining whether Vanadium Pentoxide, used as a catalyst in manufacturing excisable goods by an Export Oriented Unit (EOU), qualifies as a 'raw material' under Notifications No. 8/97-CE and 23/03-CE. The dispute arose as the Revenue argued that since Vanadium Pentoxide was imported and used in production, the EOU was not eligible for concessional duty rates. The EOU contended that Vanadium Pentoxide was merely a catalyst and not a raw material. The Tribunal, in appeal, reversed the Order-in-Original, holding that Vanadium Pentoxide did not qualify as a raw material. The Court analyzed the definition of 'raw material' in the context of the EXIM Policy and common parlance, emphasizing that catalysts are distinct from raw materials in chemical processes.

The Court referred to the case of CCE VS. Ballarpur Industries Ltd. to differentiate between ingredients used in chemical processes, highlighting that catalysts, like Vanadium Pentoxide, retain their identity, remain outside the end product, and are not consumed in the manufacturing process. The Court rejected the Revenue's argument that all ingredients mentioned in the case should be considered raw materials, clarifying that each case must be assessed based on its unique facts. Additionally, the Court cited a previous Tribunal judgment to support its stance that catalysts are not classified as raw materials in chemical manufacturing.

Ultimately, the Court concluded that Vanadium Pentoxide, being a catalyst that retains its character, remains outside the end product, and is not consumed during manufacturing, cannot be categorized as a raw material. Therefore, the Tribunal's decision to grant the EOU the benefit of the Notifications was upheld. The appeals were dismissed for lacking merit, affirming that the EOU was entitled to the concessional duty rates under the mentioned Notifications based on the non-raw material status of Vanadium Pentoxide.