Process oils as lubricants do not qualify as raw materials or component parts for set-off credit under the notification.

Cutting oils, quenching oils and testing oils used merely as lubricants or process aids in manufacturing tractor and motor vehicle components do not qualify as "raw materials" or "component parts" for set-off credit under Notification No. 201/79-C.E. as amended. Applying the plain and popular meaning of those expressions, the goods must either serve as the starting material of manufacture or form part of the finished product; because the oils only facilitated machining, heat treatment and testing, they fell outside the notification. The amended notification was construed strictly, and the denial of set-off credit was upheld.

---

---

Issues: Whether cutting oils, quenching oils and testing oils used in the manufacture of tractor and motor vehicle components qualified as raw materials or component parts for the purpose of set-off credit under Notification No. 201/79-C.E. as amended.

Analysis: The oils were used only as lubricants in manufacturing operations and did not directly go into the composition of the finished goods. On the plain and popular meaning of "raw material" and "component part", the goods must serve as the starting material or form part of the finished product. The oils in question merely facilitated machining, heat treatment and testing, and therefore did not satisfy either description. The amended notification was also construed strictly in light of the post-amendment requirement that credit was available only for goods used as raw materials and component parts.

Conclusion: The oils were not raw materials or component parts and the assessee was not entitled to the benefit of Notification No. 201/79-C.E. as amended.

Final Conclusion: The impugned order denying set-off credit was sustained and the appeal failed.

Ratio Decidendi: Goods used merely as lubricants or process aids in manufacture, without forming part of the finished product or serving as the starting material of manufacture, do not qualify as raw materials or component parts for the purpose of set-off credit under the notification.

---