2024 (8) TMI 592 - AT - Central Excise

Polycril Sector 130, 140 in granite processing classified as consumables not raw materials under Notification 23/2003-CE

M/s. Madhav Marbles and Granites Ltd. Versus Commissioner of Central Excise, Salem

CESTAT Chennai held that Polycril Sector 130, 140 used in granite processing should be classified as consumables rather than raw materials. Following SC ... Classification of goods - raw-materials or consumables - Whether, the appellant’s claim that the items namely Polycril & Sector 130, 140 could be treated as consumables or, as Raw materials, as held by the Ld. Commissioner? - Applicability of Notification No. 23/2003-CE dated 31.03.2003. Classificatio of goods - HELD THAT:- The Hon’ble Supreme Court had in the case of COMMISSIONER OF CUSTOMS, COCHIN VERSUS GTN TEXTILES [2022 (10) TMI 579 - SUPREME COURT] in a more or less identical issue held that 'on merits the Learned CESTAT is not right in holding that the Assessee was entitled to benefit of Notification No. 8/97 for concessional rate of duty'. In the present case, the items in question would not meet the parameters laid down therein to hold these items under dispute before us as raw materials, since they do not remain until the final product reaches the end user. This is because, the item Polycril, as understood, would enable the dust particles on the granite block to get sedimented whereas, Sector 130, 140 is used in polishing the rough granite block which disappears finally. The goods are hence only used for processing of the final product and does not become a part of the final product. Further the products are not so essential that the final products cannot be manufactured without their use - the said items under dispute could never be treated as raw material but could only be used as consumables. Thus, the department was not justified in treating the items in question as raw materials and hence, there are no merit in the impugned order. Applicability of Notification No. 23/2003-CE dated 31.03.2003 - HELD THAT:- The Notification under reference before the Hon’ble Apex Court was No.8/97 – CE dated 01.03.1997 and here, in the present case, the Notification No.23/2003 – CE dated 31.03.2003 is involved; there are no difference between these two Notifications insofar as the conditions for availing the benefit are concerned. Hence, the ratio of the above cases could be applied here. The department was not justified in treating the items in question as raw materials and hence, there are no merit in the impugned order - the impugned order is set aside - appeal allowed. Issues Involved:1. Classification of Polycril and Sector 130, 140 as consumables or raw materials.2. Applicability of Notification No. 23/2003-CE dated 31.03.2003.3. Justification of the extended period of limitation under erstwhile S. 11 A (1) & S. 11 A (4) of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Classification of Polycril and Sector 130, 140 as Consumables or Raw Materials:The core issue is whether Polycril and Sector 130, 140 used in the manufacture of granite blocks should be classified as consumables or raw materials. The assessee argued that Polycril is mixed with water to sediment granite dust particles, which are periodically removed and discarded, and Sector 130, 140 is an abrasive used in polishing granite blocks, which gets consumed entirely during the process. Both items do not form part of the end product, i.e., polished granite slabs/tiles.The department contended that these items should be considered raw materials, citing the definition in FTP 2009-14 and the decision in Collector of Central Excise, New Delhi Vs. Ballarpur Industries Ltd., where ingredients essential for the manufacturing process were deemed raw materials, even if consumed during the process.The Tribunal found that these items are used in processing but do not become part of the final product. They are consumed during the process and do not remain until the final product reaches the end user. Thus, they should be classified as consumables, not raw materials.2. Applicability of Notification No. 23/2003-CE dated 31.03.2003:The assessee utilized Notification No. 23/2003-CE to clear goods at a concessional rate, claiming that the final products were manufactured wholly from indigenous raw materials. The department argued that the use of imported consumables disqualified them from this benefit.The Tribunal referenced the Supreme Court's decision in Commissioner of Customs, Cochin Vs. GTN Textiles, which distinguished between consumables and raw materials. It concluded that the items in question do not meet the criteria to be considered raw materials under the notification, as they do not form part of the final product.3. Justification of the Extended Period of Limitation:The Show Cause Notice invoked the extended period of limitation under erstwhile S. 11 A (1) & S. 11 A (4) of the Central Excise Act, 1944, alleging that the assessee contravened the provisions of Notification No. 23/2003-CE and Rule 6 of the Central Excise Rules, 2002.The Tribunal did not find sufficient grounds for invoking the extended period of limitation, aligning with the Supreme Court's stance in similar cases where the extended period was deemed unjustified.Conclusion:The Tribunal held that Polycril and Sector 130, 140 are consumables, not raw materials, and thus the assessee's claim under Notification No. 23/2003-CE was valid. The extended period of limitation was not justified. Consequently, the impugned order was set aside, and the appeal was allowed with consequential benefits as per law.