2018 (12) TMI 150 - AT - Central Excise

100% EOU - rate at which Central Excise Duty is required to be paid for clearance from 100% EOU to DTA - benefit of N/N. 23/2003 denied on the ground that the appellant has not satisfied condition specified in the Notification that the goods should be manufactured exclusively out of indigenous raw materials - Held that - The circular dated 31/01/2002 proposed to deny the benefit but the subsequent circular dated 28/03/2002 advised to extend such benefit - The Apex Court in the case of Vanasathali Textile 2007 (10) TMI 303 - SUPREME COURT OF INDIA in which the Apex Court examined the scope of Notification 08/1997 ibid. The term Consumables as per the Apex Court refers only to material which is utilized as an input in the manufacturing process but is not identifiable in the final product, by reason of fact that it has got consumed therein. From the nature of the use of the imported item, it is evident that the item is in the nature of the consumable. The purport of the CBEC Circular is to allow the benefit of the Notification 08/1997 as long as the final products are manufactured by EOU exclusively out of indigenous raw materials notwithstanding the of use of consumables, even if imported. Benefit of notification cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
Rate of Central Excise Duty for clearance from 100% EOU to DTA; Applicability of Notifications No. 08/1997 and 23/2003; Use of imported item 'Somentor-43' in manufacturing process; Benefit denial based on imported consumables; Interpretation of CBEC circulars and Supreme Court decisions.

Analysis:
The appeal challenged an Order-in-Original regarding the rate of Central Excise Duty for clearance from 100% EOU to DTA during 2002-03 to 2005-06. The appellant, a manufacturer of rolled aluminum products, used raw materials from their parent unit and sold products in DTA after paying Central Excise Duty. The dispute arose from the use of an imported item 'Somentor-43' as a coolant during manufacturing. The Revenue contended that this item disqualified the appellant from benefits under Notifications No. 08/1997 and 23/2003.

The appellant argued that the imported item was a consumable, not a raw material, justifying benefit entitlement. They cited CBEC circulars and the Vanasthali Textile Industries Ltd. case where the Supreme Court allowed benefits despite imported consumables. The appellant emphasized the item's minimal cost in the total product. The Revenue justified the benefit denial, citing circulars requiring imported consumables with capital goods, not in the manufacturing process.

The Tribunal examined the item 'Somentor-43' and concluded it was a consumable used as a coolant. Referring to conflicting CBEC circulars, the Tribunal noted the Apex Court's definition of consumables and upheld benefit entitlement if final products were made exclusively from indigenous raw materials, despite imported consumables. Consequently, the impugned order demanding differential duty was set aside, and the appeal was allowed.