Exemption for packing materials: imported paper cones used after yarn manufacture were not treated as raw materials.

Imported paper cones used for winding cotton yarn in a 100% EOU were treated as packing materials, not raw materials, because they were used only after yarn manufacture was complete and the contemporaneous understanding of the assessee and government authorities supported that classification. On that basis, the exemption term "raw materials" in Notification No. 8/97-CE could not be stretched to include packing materials. The paper cones therefore remained outside the raw-material restriction, and the assessee was entitled to the notification benefit.

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Issues: Whether imported paper cones used for winding cotton yarn in a 100% EOU were to be treated as raw materials so as to deny the benefit of Notification No. 8/97-CE dated 01.03.1997.

Analysis: The imported paper cones were shown to be packing materials, including by reference to the Ministry of Commerce's communication. The expression "raw materials" in the exemption notification could not be extended to cover packing materials. The paper cones were used only after manufacture of cotton yarn was complete, and the contemporaneous understanding of the assessee and the Government authorities treated them as packing materials distinct from raw materials. The departmental case was not supported by contrary evidence strong enough to dislodge the findings of the first appellate authority.

Conclusion: The paper cones were not raw materials, and the assessee was entitled to the benefit of Notification No. 8/97-CE dated 01.03.1997. The Revenue's appeal failed.

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