Imported consumables are not raw materials for exemption, and a binding circular can defeat extended limitation.

Imported WEBNIX used as a de-foaming surfactant in glove manufacture was treated as a consumable and not a raw material, so exemption under Notification No. 8/97-C.E. could not be denied on that basis. The article also notes that the Board circular then in force clarified that imported consumables did not disqualify the unit from the notification benefit; a later withdrawal could not govern the earlier period. Because the show cause notice was issued beyond the normal period and no sustainable basis existed for the extended period, the demand was held time-barred. The impugned order was set aside and the assessee succeeded on merits and limitation.

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Issues: (i) Whether imported WEBNIX used in the manufacture of gloves was a raw material so as to deny exemption under Notification No. 8/97-C.E.; (ii) Whether the demand was barred by limitation in view of the Board circular prevailing during the relevant period.

Issue (i): Whether imported WEBNIX used in the manufacture of gloves was a raw material so as to deny exemption under Notification No. 8/97-C.E.

Analysis: WEBNIX was used as a de-foaming surfactant to improve the quality of gloves and reduce pinholes. The gloves could still be manufactured without it. The expression "consumable" was treated as distinct from "raw material", and imported consumables that merely assist the manufacturing process without forming part of the end product could not be equated with raw materials. The notification denied the benefit only where imported raw materials were used, not where imported consumables were used.

Conclusion: The WEBNIX was a consumable and not a raw material; denial of the notification benefit on that ground was unsustainable and the finding was in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation in view of the Board circular prevailing during the relevant period.

Analysis: During the relevant period, the Board circular clarified that imported consumables did not disqualify a unit from the notification benefit. A later withdrawal of that circular could not justify denial for the earlier period, since departmental circulars binding the Revenue governed the field when the notice period arose. The show cause notice was issued beyond the normal period, and no sustainable basis remained to invoke the longer limitation period.

Conclusion: The demand was barred by limitation and this issue was also decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded on merits as well as on limitation.

Ratio Decidendi: Imported consumables used in manufacture are not to be treated as raw materials where the exemption notification is confined to raw materials, and a departmental circular in force during the relevant period binds the Revenue for limitation and exemption purposes.

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