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TMI Blog2024 (8) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... stood, would enable the dust particles on the granite block to get sedimented whereas, Sector 130, 140 is used in polishing the rough granite block which disappears finally. The goods are hence only used for processing of the final product and does not become a part of the final product. Further the products are not so essential that the final products cannot be manufactured without their use - the said items under dispute could never be treated as raw material but could only be used as consumables. Thus, the department was not justified in treating the items in question as raw materials and hence, there are no merit in the impugned order. Applicability of Notification No. 23/2003-CE dated 31.03.2003 - HELD THAT:- The Notification under reference before the Hon ble Apex Court was No.8/97 CE dated 01.03.1997 and here, in the present case, the Notification No.23/2003 CE dated 31.03.2003 is involved; there are no difference between these two Notifications insofar as the conditions for availing the benefit are concerned. Hence, the ratio of the above cases could be applied here. The department was not justified in treating the items in question as raw materials and hence, there are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, in Notification No. 23/2003-CE the concessional duty equal to the aggregate of 50% of the basic customs duty plus additional duties of excise / education Cess that would be liable on the like goods imported, if the goods are cleared into the DTA in terms of the para 6.8 of the FTP 2009-14. 2.3. It appeared that the assessee was paying only the excise duty on the polished granite slabs and tiles when manufactured out of indigenous raw material granite rough blocks and cleared into DTA sale in terms of Sl. No 3 of the table annexed to Notification No. 23/2003-CE dated 31 March 2003 and was paying 50% of customs duty when the finished goods are made out of imported granite rough blocks by keeping separate records. 3. Further, the Audit team of the Department appears to have found during audit the appellant using imported goods in the manufacture of final products, the details of which were as under : Polycril: This item is mixed in smaller quantity while the water is recycled for making granite dust particles in the water to become strong sediment which is periodically removed and discarded. Sector 130, 140: It is an abrasive used during the process of polishing the rough gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumables or, as Raw materials, as held by the Ld. Commissioner ? 5.1 The issue therefore revolves around treating Polycril and Sector 130, 140 which are used by the importer in the manufacture of granite blocks, whether they are raw-materials or consumables. It appears from the record placed before us that when the audit team of the department visited the factory of the taxpayer, the whole process have been explained, including the exact usage of these two items in question. 5.2 Polycril is explained to be mixed in smaller quantity with water while the water is recycled for making granite dust particles in the water to become strong sediment, which is periodically removed and discarded. 5.3 Sector 130, 140 is explained to be an abrasive used during the process of polishing the rough granite blocks and the abrasive portion would get reduced in the height in prolonged use, that would disappear finally and the plastic holders would only remain. 6.1 It is thus the case of the taxpayer that Polycril was mixed in water in small quantity, whenever the water is recycled for use in the manufacture of polished granite slabs/tiles, the same would help to sediment the granite dust particles c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main uninfluenced and unaltered and remain independent of and outside the end-products and those, as here, which might be burnt-up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called Raw-Material for the end-product. One of the valid tests, in our opinion, could be that the ingredient should be so essential for the chemical processes cluminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning-up is its quality and value as raw-material. In such a case, the relevant test is not its presence in the end-product, but the dependence of the end-product for its essential presence at the delivery end of the process. The ingredient goes into the making of the end-product in the sense that without its absence the presence of the end-product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus. to hold that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: The appellant-assessee is engaged in the manufacture of cotton yarn which is 100% Export Oriented Undertaking (EOU) constituted as per Export and Import Policy 1997-2002. During the period August, 2000 to March, 2001, it had cleared the aforesaid cotton yarn made to Domestic Tariff Area (DTA). While clearing these goods, the appellant did not pay normal excise duty that is chargeable for the aforesaid product. Instead it took benefit of Notification No. 8/97-C.E., dated 1-3-1997 and paid duty at concessional rate in terms of the said notification. This notification provides for concessional rate to those products which are cleared to DTA by an EOU. However, one of the conditions for availing the benefit of the said notification is that the products that are manufactured by such EOU should have been manufactured using indigenous raw material only. 2. The appellant while manufacturing cotton yarn had used indigenous cotton and also imported wax. The Department sought to deny the benefit of Notification No. 8/97-C.E. on the ground that imported wax was also used, which was treated as the raw material . Show cause notice dated 4-9-2001 was, accordingly, issued by the Superinten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, benefit of Notification No. 8/97-C.E. cannot be extended to the appellant. It is not in dispute that wax is used in the process which is an imported material. However, the refutation of the appellant is that wax is not raw material and it is only used as consumable in the process of manufacturing cotton yarn. The Export and Import Policy 1997-2002, which is applicable in the instant case, defines both the expressions, namely, consumables and raw material and, therefore, it would be apposite to take note of these definitions : Consumables means any item which participates in or is required for a manufacturing process, but does not form part of the end product. Items which are substantially or totally consumed during a manufacturing process will be deemed to be consumables. Raw material means : (i) basic materials which are needed for the manufacture of goods, but which are still in a raw, natural, unrefined or unmanufactured state; and (ii) for a manufacturer, any materials or goods which are required for the manufacturing process, whether they have actually been previously manufactured or are processed or are still in a raw or natural state. 15. As is evident from the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the end products and those, as here, which might be burnt up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last-mentioned class qualify themselves as and are eligible to be called raw material for the end product. One of the valid tests, in our opinion, could be that the ingredient should be so essential from the chemical processes culminating in the emergence of the desired end product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning up is its quality and value as raw material. In such a case, the relevant test is not its absence in the end product, but the dependence of the end product for its essential presence at the delivery end of the process. The ingredient goes into the making of the end product in the sense that without its absence the presence of the end product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus. 14. CEGAT had held in that case that the use of indigo dye is as a raw material in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atment of terry towels. The question that fell for consideration was as to whether the aforesaid imported material used while manufacturing the goods could be termed as raw material or was only consumable . The Tribunal had accepted the stand of the Department holding that the assessee was using carboxymethyl cellulose which is sizing material in the manufacture of finished product and since it was imported material, the assessee was not entitled to the benefit of the notification. In support of its conclusion that the sizing material is an essential ingredient of weaving terry towel, reliance was placed on the decision of this Court in CCE v. Ballarpur Industries Ltd. - (1989) 4 SCC 566 = 1989 (43) E.L.T. 804 (S.C.) wherein this Court has held that the valid tests to determine whether the ingredient qualifies to be called raw material could be that ingredient should be so essential for the chemical processes culminating in the emergence of the desired end product. 18. As already pointed out above, Export and Import Policy 1997-2002 provided the definition of consumables and raw material . The definition of consumables suggest that if a particular item participates in or is require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt supra, we are of the view that the items in question would not meet the parameters laid down therein to hold these items under dispute before us as raw materials, since they do not remain until the final product reaches the end user. This is because, the item Polycril, as understood, would enable the dust particles on the granite block to get sedimented whereas, Sector 130, 140 is used in polishing the rough granite block which disappears finally. The goods are hence only used for processing of the final product and does not become a part of the final product. Further the products are not so essential that the final products cannot be manufactured without their use. Thus, the items literally get consumed during the processing of the final product but do not become a part of it. There is no disputes that the appellant is selling the granite block/tiles as the end product and these items under dispute do not pass-on with such final products. Therefore, the said items under dispute could never be treated as raw material but could only be used as consumables. 10.1 In that view of the matter, we hold that the department was not justified in treating the items in question as raw mater ..... 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