Imported consumables do not defeat indigenous raw material exemption where they do not form part of the finished goods.

Imported steel grits used as abrasive cutting media in sawing were treated as consumables linked to the machinery, not as raw materials for the granite slabs, because they did not become part of the finished goods. On that basis, the final products were regarded as manufactured wholly from indigenous raw materials, so the condition in Notification No. 8/97-C.E. was satisfied. The assessee was therefore entitled to the notification benefit, and the disallowance was held unsustainable.

---

---

Issues: Whether the assessee was entitled to the benefit of Notification No. 8/97-C.E. despite using imported steel grits as consumables in the manufacturing process, on the footing that the final products were manufactured wholly from indigenous raw materials.

Analysis: The imported steel grits were used as abrasive cutting media in the sawing operation and functioned with the machinery during cutting. They did not form part of the raw materials for the granite slabs and did not become a constituent of the finished goods. On that basis, the imported items were treated as consumables connected with the capital goods rather than as raw materials used in manufacture. Since the use of imported consumables did not alter the position that the final products were manufactured from indigenous raw materials, the condition attached to the notification was satisfied.

Conclusion: The assessee was entitled to the benefit of the notification, and the disallowance was not sustainable.

---