2008 (7) TMI 4 - SC - Central Excise

Exemption to 100% EOU Sale of goods to DTA manufactured wholly from the raw materials produced or manufactured in India Original authority denied the exemption since the goods were manufactured from the indigenous inputs Tribunal allowed the exemption under notification no. 8/97 SC has remanded the matter to tribunal for de-novo consideration whether consumable falls within the broader scope of the words raw materials?

Summary

Issues:
Challenge to order by Customs Excise and Service Tax Appellate Tribunal regarding eligibility for exemption under Notification No.8/97-CE for Hydrogen Peroxide manufactured and cleared to Domestic Tariff Area (DTA).

Detailed Analysis:

1. Eligibility for Exemption under Notification No.8/97-CE:
The issue revolved around the eligibility of the appellant for the benefit of exemption under Notification No.8/97-CE for Hydrogen Peroxide manufactured and cleared to the Domestic Tariff Area (DTA). The Notification exempts finished products manufactured in a 100% Export Oriented Unit (EOU) wholly from raw materials produced in India. The original authority did not accept the appellant's claim that the finished goods were manufactured wholly from raw materials produced in India.

2. Adjudication and Appeal Process:
The assessee filed an appeal before the Commissioner of (Appeals) Excise, who accepted the contention that the items in question were consumables and not raw materials, thereby granting the benefit of exemption. However, the revenue appealed to the CESTAT, which ruled in favor of the revenue, denying the appellant the benefit of the Notification.

3. Interpretation of Raw Materials vs. Consumables:
The debate centered on whether the materials in question should be classified as raw materials or consumables. The appellant argued that the items were consumables as per the EXIM Policy's definition, emphasizing that consumables participate in the manufacturing process but do not form part of the end product. The appellant relied on a Board's Circular and definitions from the policy to support their stance.

4. Legal Precedents and Interpretation of 'Raw Material':
The judgment referred to legal precedents and interpretations of 'raw material,' emphasizing the importance and indispensability of an ingredient in the manufacturing process. The Court discussed the distinction between raw materials and consumables, highlighting that consumables are utilized as inputs but are not identifiable in the final product as they get consumed during the process.

5. Remand and Consideration by CESTAT:
The Supreme Court set aside the CESTAT's judgments as they did not consider the materials on record in the appropriate perspective. The matter was remitted to the CESTAT for fresh consideration in accordance with the law. The Court directed the CESTAT to keep in view the decision in Vanasthali Textiles Industries Ltd. v. Commr. Of C.Ex., Jaipur, Rajasthan.

6. Disposition:
The appeals were disposed of accordingly with no order as to costs, indicating that the case was to be re-examined by the CESTAT considering the legal principles discussed in the judgment.

This comprehensive analysis highlights the key aspects of the legal judgment, focusing on the issues, arguments presented, legal interpretations, and the ultimate decision of the Supreme Court.