Process aids are not raw materials or component parts; limitation under recovery notice applies where Section 11A is invoked.

An exemption under Notification No. 201/79-CE was confined to duty-paid goods used as raw materials or component parts in manufacture. Nickel catalyst, bleaching activated earth and activated carbon used only as process aids in producing vegetable product, and not forming part of the finished product, did not satisfy that condition and were not eligible for the exemption. The demand for recovery of credit was also governed by Section 11A because the notice expressly invoked that provision, so the six-month limitation applied; the demand beyond that period was time-barred to that extent.

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Issues: (i) Whether nickel catalyst, bleaching activated earth and activated carbon used in the manufacture of vegetable product were entitled to the benefit of Notification No. 201/79-CE as raw materials or component parts. (ii) Whether the demand for recovery of credit was barred by limitation under Section 11A of the Central Excises and Salt Act, 1944.

Issue (i): Whether nickel catalyst, bleaching activated earth and activated carbon used in the manufacture of vegetable product were entitled to the benefit of Notification No. 201/79-CE as raw materials or component parts.

Analysis: The notification granted exemption only where duty-paid goods falling under Item 68 were used as raw materials or component parts in the manufacture of excisable goods. The nickel catalyst was used as a cleaning agent in the manufacturing process, was not present in the final product, and therefore did not answer the description of raw material. For the same reason, it could not be treated as a component part, since it did not go into the composition of the finished vegetable product. On the same reasoning, bleaching activated earth and activated carbon also did not satisfy the statutory conditions for the exemption.

Conclusion: The claim to the benefit of Notification No. 201/79-CE failed; the inputs were not eligible for exemption.

Issue (ii): Whether the demand for recovery of credit was barred by limitation under Section 11A of the Central Excises and Salt Act, 1944.

Analysis: The demand-cum-show-cause notice expressly invoked Section 11A, and the subsequent order confirmed the demand on that footing. The Revenue could not later contend that the demand was founded on some other provision for the purpose of avoiding limitation. The demand beyond six months from the relevant date was therefore hit by limitation to that extent.

Conclusion: The finding that part of the demand was time-barred was upheld.

Final Conclusion: The exemption claim failed on merits, but the assessee succeeded on the limitation issue to the extent that part of the demand was held time-barred.

Ratio Decidendi: For an exemption confined to goods used as raw materials or component parts, a substance used only in the manufacturing process and not forming part of the final product is not covered; where the demand notice is expressly issued under Section 11A, limitation under that provision applies to the recovery.

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