2008 (11) TMI 156 - AT - Central Excise

Notification No. 8/97-C.E., as amended provides concessional rate of duty to the clearances effected from a 100% EOU in DTA, provided the same are manufactured wholly from the raw materials purchased or manufactured in India assessee used imported material WEBNIX also - assessee plea is that use of WEBNIX during manufacturing of LATEX GLOVES is not as one of the raw materials but as consumables material, so use of WEBNIX not results in denial of exemption plea accepted Moreover Circular No. 389/22/98-CX dt. 5-5-1998, granting exemption in case imported consumables are used, is binding on revenue and exemption not deniable when this circular is withdrawn subsequently by Circular 614/5/2002

Summary

Issues:
1. Interpretation of Notification No. 8/97-C.E. regarding concessional rate of duty for 100% EOU clearances in DTA.
2. Classification of WEBNIX-1065-3 as raw material or consumable.
3. Application of Board's circular on the use of imported consumables.
4. Limitation period for raising demand on duty.

Analysis:
1. The case involved the interpretation of Notification No. 8/97-C.E. which provides a concessional rate of duty for clearances from a 100% EOU in DTA. The appellant, engaged in manufacturing Latex examination and surgical gloves, faced a show cause notice for using imported material WEBNIX-1065-3. The notice led to a demand of duty and penalties, which the appellant contested through appeals.

2. The primary issue was the classification of WEBNIX-1065-3 as either a raw material or a consumable. The appellant argued that WEBNIX was a consumable used as a de-foaming agent in the manufacturing process to improve glove quality. The Tribunal analyzed the use of WEBNIX and concluded that it was not an essential raw material for glove production but a consumable enhancing product quality, citing relevant legal precedents.

3. The Tribunal considered the application of Board's circular regarding the use of imported consumables. The circular clarified that the benefit of the Notification would still apply even if imported consumables were used, as long as other conditions were met. Despite the withdrawal of the circular in 2002, the Tribunal emphasized that the circular in force during the relevant period should be applied, as per Supreme Court decisions on the binding nature of Board circulars.

4. Lastly, the Tribunal addressed the limitation period for raising the demand on duty. It noted that the demand was beyond the normal limitation period and that the Board's circular of 1998, which allowed the benefit of the Notification for imported consumables, should be upheld. Consequently, the Tribunal set aside the impugned order and allowed the appeal on both merits and limitation, emphasizing the binding nature of the circular in force during the relevant period.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning leading to the decision in favor of the appellant.