Consumable status of electricity in zinc manufacture upheld, making it eligible for deemed export benefit.

Electricity used in the electrolytic manufacture of zinc was treated as a consumable because it is substantially and necessarily consumed in the manufacturing process, even though it is intangible and does not form part of the finished product. The Court held that electricity is measurable, quantifiable and indispensable to the process, and therefore falls within the consumables permitted for procurement from the Domestic Tariff Area under the Foreign Trade Policy and Handbook of Procedure. The exclusion of power-generating equipment did not apply, as that refers to inputs used to generate electricity, not electricity itself. The rejection orders were quashed, and deemed export benefit was held available.

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Issues: Whether electricity used in the electrolytic manufacture of zinc is a "consumable" within paragraph 9.15 of the Foreign Trade Policy and, if so, whether it falls within the permissible goods eligible for deemed export benefit under paragraph 6.6.1 of the Handbook of Procedure.

Analysis: Electricity was held to be an item that participates in and is substantially consumed in the manufacturing process, even though it does not form part of the end product. The Court treated intangibility as no bar to classification as a consumable, emphasizing that electricity is measurable, quantifiable, and indispensable to the electrolytic process used for producing zinc. Since paragraph 6.6.1 of the Handbook of Procedure permits procurement of consumables from the Domestic Tariff Area, electricity was held to fall within that category. The exclusion of power-generating equipment from the provision did not alter the position, because those items are inputs for generating electricity, whereas electricity itself is the consumable used in manufacture.

Conclusion: Electricity used in zinc manufacture is a consumable and is eligible for deemed export benefit. The rejection orders were therefore unsustainable and were quashed.

Ratio Decidendi: An item that is substantially and necessarily consumed in the manufacturing process, though intangible and not forming part of the finished product, qualifies as a consumable for deemed export purposes.

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