Raw material test for proforma credit turns on essential use in manufacture, not physical presence in the finished product.

Sodium sulphate used in paper and paperboard manufacture was treated as "raw material" under Notification No. 105/82-C.E. because the term was given its ordinary commercial meaning in the manufacturing context. The decisive test was whether the input was essential and indispensable to the chemical process, not whether it survived in the finished product. Since sodium sulphate was necessary for sulphate pulping and chemical recovery, and manufacture would be commercially inexpedient without it, the manufacturer was entitled to proforma credit of duty already paid on the input.

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Issues: Whether sodium sulphate used in the manufacture of paper and paperboards qualified as "raw material" within Notification No. 105/82-C.E. so as to entitle the manufacturer to proforma credit of duty already paid on the input.

Analysis: The expression "raw material" was held to be undefined and therefore to bear its ordinary commercial meaning in the context of the manufacturing process. The decisive test was not whether the ingredient survived in the finished product, but whether it was so essential and indispensable to the chemical process that its consumption or burning-up was itself part of its function as a raw material. Sodium sulphate was found to be an essential chemical in the sulphate pulping and chemical recovery process, without which the manufacture of paper would be commercially inexpedient. The Court rejected the contention that only materials which physically remain in the end-product can qualify, and also rejected the argument that the input was merely an ancillary aid or a process anterior to manufacture.

Conclusion: Sodium sulphate was raw material within the meaning of the notification and the manufacturer was entitled to the credit.

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