2009 (3) TMI 172 - AT - Customs

EOU entitled to duty exemption despite using imported consumables for manufacturing granite slabs

BANNARI AMMAN SUGARS LTD. Versus COMMISSIONER OF C. EX., SALEM

The Tribunal allowed the appeal, ruling that the use of imported consumables, including resin and hardner, in addition to indigenous raw materials by an ... EOU – Sale of goods to DTA (Domestic Tariff Area) - Notification No. 23/03-C.E., dated 31-3-2003 - notification exempted goods manufactured wholly from imported (sic) [indigenous] raw materials and cleared by an EOU to DTA from the duty of excise equal to that leviable on such goods manufactured and cleared by other DTA units – held that - ‘Consumables’ meant any item which participated and was required for a manufacturing process but did not form part of the end product. These were substantially or totally consumed during the manufacturing process. ‘Raw material’ meant basic material which were needed for the manufacture of goods whether they had been previously manufactured or were processed or were still in a raw or natural state. - granites are basic material that go into the production of granite slabs; the resin and hardner in question are consumables different from raw materials. Notification No. 23/2003-C.E. extends its benefit to goods manufactured wholly from indigenous raw materials. Issues:Interpretation of Notification No. 23/03-C.E., dated 31-3-2003 exempting goods manufactured wholly from imported raw materials by an EOU to DTA from duty of excise. Whether the imported resin and hardner used in manufacturing granite slabs by an EOU qualify as raw materials for availing the exemption under the notification.Analysis:The appeal involved the interpretation of Notification No. 23/03-C.E., which exempted goods manufactured wholly from imported raw materials by an EOU to DTA from the duty of excise. The appellants had manufactured and cleared granite slabs during a specific period, availing the exemption. However, the impugned order affirmed a demand of duty along with interest, as the appellants had used an imported resin and hardner in addition to indigenous raw materials in manufacturing the granite slabs.The consultant for the appellants relied on previous tribunal decisions, such as Gem Granites v. CC, Seaport (Import), Chennai, which favored the assessee in a similar dispute involving the use of imported epoxy resin in the production of granite slabs by an EOU. The argument was based on the distinction between raw materials and consumables, emphasizing that the imported resin used was a consumable necessary for polishing the granite slabs, and thus, the benefit of the notification should apply.On the other hand, the JDR contended that the imported resin was essential for the production of polished granites, citing the Apex Court's judgment in Collector of Central Excise v. Ballarpur Industries Ltd., which defined raw materials to include inputs essential for the production of finished goods. Additionally, reliance was placed on the Tribunal's decision in Century Denim & Others v. CCE, supporting the view that essential inputs, even if physically absent in the finished goods, could still be considered raw materials.The Tribunal analyzed the case records and previous decisions, noting that the imported resin and hardner were used for imparting a glossy finish to the granite slabs and were almost entirely consumed in the process. Referring to the observations in Ballarpur Industries case, the Tribunal concluded that the disputed resin and hardner did not qualify as raw materials essential for the production of the granite slabs. Following the meanings of 'raw materials' and 'consumables' as per the Exim Policy, the Tribunal held that granites were basic materials, while the resin and hardner were consumables, different from raw materials, and thus, the impugned order denying the benefit of the notification was deemed incorrect.In conclusion, the Tribunal allowed the appeal, stating that the use of imported consumables would not disentitle an EOU to the benefit of the notification. The decision was based on the understanding that granites were basic materials, and the imported consumables did not fall under the category of raw materials as per the notification's requirements.