Appellate Tribunal in Chennai Allows Appeal on Notification 8/97-C.E. Disallowance

The Appellate Tribunal, Chennai, allowed the appeal in favor of the assessees regarding the disallowance of benefits under Notification No. 8/97-C.E. The Tribunal recognized that the imported consumables, steel grits, were integral to the machinery for cutting operations and not classified as raw materials in the manufacturing process. As the assessees used only indigenous raw materials in their manufacturing process, the Tribunal extended the benefit of the notification to them, setting aside the previous order disallowing the benefit.

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Issues: Disallowance of benefit under Notification No. 8/97-C.E. for using imported consumables alongside indigenous raw materials in manufacturing process.

Analysis:
1. The Appellate Tribunal, Chennai, addressed the issue of disallowing the benefit of Notification No. 8/97-C.E., dated 1-3-97, which grants exemption to finished products, rejects, waste, or scrap produced in a 100% EOU or a free trade zone wholly from raw materials manufactured in India. The authorities disallowed the benefit due to the use of imported consumables alongside indigenous raw materials.

2. The Tribunal considered the detailed explanation provided by the assessees regarding the use of steel grits in the manufacturing process. The steel grits, being angular granules used for cutting granite, were mixed with limestone powder to form a slurry poured over blocks to be sawn. The steel grits, after being collected, were recycled until fully consumed during cutting operations.

3. The Tribunal acknowledged that the imported steel grits were used as a part of the machinery for cutting granite and not as raw materials. As the process of manufacture using only indigenous raw materials was not disputed, the Tribunal concluded that the benefit of the notification should be extended to the assessees. Therefore, the Tribunal accepted that the assessees were using only indigenous raw materials in their manufacturing process, justifying the extension of the notification's benefit.

4. Consequently, the Appellate Tribunal set aside the impugned order disallowing the benefit and allowed the appeal in favor of the assessees. The Tribunal's decision was based on the understanding that the imported consumables, specifically steel grits, were integral to the machinery used for cutting operations and not considered raw materials in the manufacturing process.

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