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TMI Blog2007 (7) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the yarn. The wax coating on the yarn is necessary for knitting of the yarn into hosiery. The coating disappears in the further processes the knitted fabric is subjected to. Therefore, at the time of clearance of the yarn from the factory the wax forms part of the yam. These facts are not in dispute. 2. The Commissioner had accepted the argument of the assessee that wax was a consumable. As per the relevant Exim policy provisions, consumables are materials that get used up in the process of manufacture. In the instant case wax does not get used up in the manufacture of yarn but remains part of the yarn. Part of the impugned clearances had been manufactured with imported cotton. The Commissioner had accepted the plea of the assessee that cotton that had suffered duty on import was at par with indigenous cotton and cotton yarn manufactured using such cotton was eligible for the benefit of Notification No. 8/97. This was not in accordance with the terms of the Notification. Therefore the impugned order was not sustainable. This is the case of the Revenue. 3. Revenue has relied on the policy provisions, CBEC's clarification and case law detailed hereafter. As per para 3.13 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court. In Vimal Textile Industries (supra), the Tribunal had denied the benefit of Notification No. 8/97 as the appellants had used imported raw materials in the process of manufacture of the goods cleared in DTA. Accordingly, the Tribunal, in the Ginny International Limited (supra) case, had upheld the demand confirmed by the Commissioner (Appeals). 4. The learned Sr. Counsel appearing for the assessee submitted that an exemption notification should not be interpreted in such a way as to frustrate the legislative intent behind it. On a strict interpretation of the notification, once the subject was found to fall in the exception to be eligible for the exemption, the notification should be construed liberally to allow it full play. He cited the case law Union of India v. Wood Papers Limited [1990 (47) E.L.T. 500 (S.C.)] laying down the said ratio in support. He also cited the following observations contained in the judgment of the Apex Court in Tata Oil Mills Co. Ltd. v. CCE [1989 (43) E.L.T. 183 (S.C.)]. "But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects: (a) the object and purposes of the exemption and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Mills v. CCE [149 E.L.T. 498 (Tri.-Del.)] had decided that the wax used in the cone winding machine was a consumable. 6. We have carefully considered the case records and the rival submissions. The Notification No. 8/97-C.E. exempts the finished products, rejects and waste or scrap specified in the Schedule to the Central Excise Tariff Act, 1985 and produced or manufactured, in a hundred per cent export oriented undertaking or a free trade zone wholly from the raw materials produced or manufactured in India from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 (1 of 1944), as is in excess of-an amount equal to the aggregate of the duties of excise leviable under the said Section 3 of the Central Excise Act or under any other law for the time being in force on like goods, produced or manufactured in India other than in a hundred percent export oriented undertaking. 6.1 In UOI v. Wood Papers Ltd (supra) the Apex Court had decided that the question of applicability of a notification to grant exemption in the nature of an exception was to be construed strictly and against the subject. But once the ambiguity was removed, a liberal cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as produced or manufactured wholly from cotton. The High Court upheld the order of the Tribunal in the case which had denied the appellants the benefit of Notification 8/97 in respect of such Denim fabric manufactured using also imported dye. The same view was taken by the Tribunal in the case of Century Denim (EOU) (supra) upheld by the Apex Court. 7. We find that the term "consumables" is defined in para 3.13 of the Exim Policy 1997-2002 as under "Consumables" means any item, which participates in or is required for a manufacturing process, but does not form a part of the end-product. Items, which are substantially or totally consumed during a manufacturing process, will be deemed to be consumables." The Circular No. 614/5/2002-CX, dated 31-1-2002 of the CBEC had clarified that use of imported consumables will not be a bar to an EOU enjoying ex emption under Notification No. 8/97 in respect of goods manufactured and cleared by it in the DTA. However, the consumables have been defined in the Exim Policy as items required for manufacturing process but do not form -a part of the end product. These are goods that get mostly or entirely consumed in the manufacturing process. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not eligible for the benefit of the Notification. In Forbes Gokak Ltd. (supra) the Tribunal followed a different definition of the raw material rendered by a Textile Technology Expert and took a contrary view of the scope of Notification No. 8/97. The case dealing with use of epoxy resin in the finishing of granite slabs is different from the subject case in that epoxy resin was removed in polishing before clearance of the finished product, granite slabs. 11. In Nahar Spinning Mills (supra), in the context of examining admissibility of imported wax discs to capital goods credit, the Tribunal decided that synthetic wax rolls were a consumable and could not be considered as a component or spares of the autoconer machine. It was only a raw material which directly went into making of the final product and hence not eligible for capital goods credit. The above case law does not advance the case of the respondents. 12. In view of the categorical definition of raw material by the Apex Court and the definition of consumables in the Exim Policy, the imported wax used in the manufacture of the impugned yam cannot be considered as a consumable and has to be held as raw material. There canno ..... 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