Raw material test under excise exemption turns on direct use in manufacture, not merely preparatory water treatment.

Eligibility as "raw material" under Notification No. 201/79 depends on the nature of the material, the manner of its use and its role in the manufacturing process. Chemicals used only to purify water and adjust pH in a preparatory stage, without being directly used in or usable for the manufacture of yarn or fabrics, do not satisfy that test. Sodium aluminate and sulphate of alumina were found to have only an indirect, preparatory function in removing impurities and neutralising water, so the claim for concessional credit was rejected.

---

---

Issues: Whether sodium aluminate and sulphate of alumina used for purification of water and adjustment of pH in the bleaching process were eligible for the concession under Notification No. 201/79 as raw materials in the manufacture of yarn or fabrics.

Analysis: The Tribunal held that the test of "raw material" cannot be reduced to any rigid formula and must depend on the nature of the material, the manner of its use and its role in the manufacturing process. Materials used only for water purification do not qualify merely because they incidentally affect the pH value of the water. On the facts, the two chemicals were used to remove suspended impurities and neutralise the water, but they were not directly used in, or usable in, the manufacture of yarn or fabrics. Their function was only preparatory and indirect, unlike materials that enter the manufacturing reaction itself.

Conclusion: The chemicals were not entitled to the benefit of Notification No. 201/79, and the claim for credit was rejected.

---