Epoxy Resin: Consumable, Not Raw Material - Concessional Duty Rate Applies

The Tribunal determined that the epoxy resin used by the assessee is a consumable, not a raw material, aligning with the Supreme Court's definition and Tribunal judgments. As a result, the granite slabs produced qualify for the concessional duty rate under Notification No. 23/2003-CE. The Department's appeals were dismissed, and the Commissioner (Appeals) orders were upheld.

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Issues Involved:
1. Classification of Epoxy Resin as Raw Material or Consumable.
2. Eligibility for Concessional Rate of Duty under Notification No. 23/2003-CE.
3. Application of Supreme Court and Tribunal Judgments on Raw Materials and Consumables.

Detailed Analysis:

1. Classification of Epoxy Resin as Raw Material or Consumable:

The Department argued that Epoxy Resin should be considered as a raw material, not a consumable, because it is used in the manufacturing process to fill cracks and provide a durable finish to the granite slabs. This classification would disqualify the slabs from being considered as produced wholly from raw materials manufactured in India, thus affecting the eligibility for the concessional rate under Notification No. 23/2003-CE.

The assessee contended that the epoxy resin is merely a consumable used to enhance the visual appearance of the granite slabs and is not essential for the slabs' production. The granite slabs are complete and usable even without the resin, which only adds gloss and smoothness.

2. Eligibility for Concessional Rate of Duty under Notification No. 23/2003-CE:

The Notification No. 23/2003-CE stipulates that goods produced or manufactured in a 100% EOU must be made wholly from raw materials produced or manufactured in India to qualify for concessional duty rates. The Department issued show cause notices demanding differential duties, asserting that the use of imported epoxy resin disqualified the assessee from the concessional rate.

The assessee argued that the epoxy resin should be treated as a consumable, not a raw material, which would allow them to maintain eligibility for the concessional rate. They supported their argument with various judgments that have classified similar materials as consumables.

3. Application of Supreme Court and Tribunal Judgments on Raw Materials and Consumables:

The Tribunal referred to the Supreme Court's judgment in Collector Vs. Ballarpur Industries Ltd., which provided a detailed analysis of what constitutes a raw material. The Court held that a raw material is essential for the chemical process leading to the final product and must be indispensable for the process.

The Tribunal also considered several other judgments:
- Gem Granites Vs. CC. Seaport (Import), Chennai: The Tribunal ruled that epoxy resins used in the manufacture of granite slabs are consumables, not raw materials, thus allowing the benefit of Notification No. 23/2003-CE.
- Imperial Granites Ltd. vs. CC&CE, Tirupathi: The Tribunal held that epoxy resin and agar used in granite slab manufacturing are consumables, not raw materials, supporting the assessee's eligibility for concessional duty rates.
- Bannari Amman Sugars Ltd. Vs. CCE, Salem: The Tribunal found that materials essential for production are raw materials, but in this case, the resin and hardener were consumables, not raw materials, thus allowing the benefit of the notification.

Conclusion:

The Tribunal concluded that the epoxy resin used by the assessee is a consumable and not a raw material. This classification aligns with the Supreme Court's definition in the Ballarpur Industries case and several Tribunal judgments. Consequently, the granite slabs produced by the assessee qualify for the concessional rate of duty under Notification No. 23/2003-CE. The appeals filed by the Department were dismissed, and the orders of the Commissioner (Appeals) were upheld.

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