2002 (11) TMI 114 - HC - Central Excise

Summary

Issues Involved:
1. Validity and legality of the impugned order passed by the Tribunal.
2. Definition and interpretation of "raw material" under the Central Excise Tariff Act, 1985.
3. Applicability of Notification No. 8/97 dated 1-3-97.
4. Doctrine of merger and its applicability.
5. Binding nature of the Supreme Court's dismissal of a similar appeal.

Detailed Analysis:

1. Validity and Legality of the Impugned Order:
The petitioner sought an order to quash the Tribunal's decision in Appeal No. E/1805, 1806/2000-D, dated 7-2-2001. The Tribunal had allowed the Revenue's appeal, setting aside the Commissioner's order, which had initially dropped the show cause notice against the petitioner. The Tribunal held that 'Indigo pure,' an imported dye used in the manufacture of Denim fabric, qualifies as a raw material. This decision was challenged on the grounds that the Tribunal had not correctly interpreted the relevant Notification and had misapplied legal principles.

2. Definition and Interpretation of "Raw Material":
The core issue was whether 'Indigo pure' dye, used in the production of Denim fabric, qualifies as a "raw material." The Commissioner had initially ruled that 'Indigo pure' was not a raw material, as it was not defined specifically within the context of the Central Excise Tariff Act and was not known as such in common trade parlance. However, the Tribunal, relying on the Supreme Court's decision in M/s. Ballarpur Industries Ltd., concluded that the dye was indeed a raw material because it was essential to the manufacturing process of the finished product, Denim fabric.

3. Applicability of Notification No. 8/97:
The petitioner argued that the benefit of Notification No. 8/97, which allows for a reduced rate of Central Excise duty for goods manufactured wholly from raw materials produced or manufactured in India, should apply. The petitioner contended that the primary raw material for Denim fabric is cotton, which is wholly produced in India, and that 'Indigo pure' dye is merely a consumable, not a raw material. The Tribunal, however, disagreed, stating that the finished product could not be considered wholly produced from Indian raw materials if an essential imported dye was used.

4. Doctrine of Merger:
The petitioner argued that the doctrine of merger did not apply since the Supreme Court's dismissal of a similar appeal (Civil Appeal No. 4017/2001) was a non-speaking order and did not constitute law under Article 141 of the Constitution. They cited the case of Kunhayammed & others v. State of Kerala & another to support this argument. The respondent countered that the dismissal by the Supreme Court rendered the petition infructuous and not tenable.

5. Binding Nature of the Supreme Court's Dismissal:
The petitioner contended that the Supreme Court's dismissal of the appeal in a similar case was not binding on them as their case had distinct facts and legal questions. They argued that their challenge to the Tribunal's order should be considered independently. The respondent, however, maintained that the Supreme Court's order should be binding, rendering the petitioner's challenge invalid.

Conclusion:
The High Court dismissed the petition, upholding the Tribunal's order. It concluded that 'Indigo pure' dye is a raw material essential for the production of Denim fabric, thereby disqualifying the petitioner from the benefits of Notification No. 8/97. The Court found no merit in the petitioner's arguments regarding the interpretation of "raw material" and the doctrine of merger. Consequently, the petition was dismissed with no order as to costs.