Imported wax treated as a consumable, so exemption for hosiery yarn manufacture was not denied under the notification.

Exemption under Notification No. 8/97-CE was held not to be denied merely because imported wax was used in winding hosiery cotton yarn cleared by a 100% EOU to DTA. The notification required manufacture wholly from raw materials produced or manufactured in India, but wax was treated as a consumable used only to maintain friction and prevent yarn breakage, not as a raw material. On that basis, use of imported wax did not breach the condition, and the resulting demand, interest and equal penalty were unsustainable.

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Issues: Whether the exemption under Notification No. 8/97-CE dated 1.3.97 could be denied on the ground that imported wax was used in the manufacture of hosiery cotton yarn cleared by a 100% EOU to DTA.

Analysis: The condition in the notification required the goods to be manufactured wholly from raw materials produced or manufactured in India. The waxing process was found to be only a consumable used at the winding stage to maintain the yarn's friction coefficient and prevent breaks. Following the directly applicable view that wax is a consumable and not a raw material, the use of imported wax did not defeat the exemption.

Conclusion: The exemption could not be denied merely because imported wax was used, and the demand, interest, and equal penalty were unsustainable.

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