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

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 for manufacturing granite slabs did not disqualify them from availing the duty exemption under Notification No. 23/03-C.E. The Tribunal differentiated between raw materials and consumables, determining that the imported resin and hardner were consumables necessary for the finishing process and not essential raw materials for production. Consequently, the appellants were deemed eligible for the duty exemption.

---

---

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.

---