Catalysts used as processing aids are not raw materials for set-off exemption under Notification No. 201/79-C.E.

Nickel catalyst and nickel aluminium alloy powder used in the manufacture of stearic acid were held not to qualify as raw materials or component parts for the purposes of Notification No. 201/79-C.E. The substances functioned only as catalysts or processing aids to accelerate or retard the chemical reaction, were not consumed in manufacture, and did not undergo chemical change. Following earlier Tribunal decisions on similar catalysts and processing aids, the notification's set-off benefit was confined to inputs that form raw materials or component parts of the excisable goods. The exemption was therefore unavailable.

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Issues: Whether Nickel Catalyst and Nickel Aluminium Alloy Powder used in the manufacture of Stearic Acid could be treated as raw materials or component parts so as to qualify for the benefit of Notification No. 201/79-C.E. as amended.

Analysis: Notification No. 201/79-C.E. granted set-off only where goods falling under Tariff Item 68 were used as raw materials or component parts in the manufacture of excisable goods. The inputs in question functioned only as a catalyst to accelerate or retard the chemical reaction. They were not consumed in the manufacturing process and did not undergo any chemical change. The earlier Tribunal decisions on similar catalysts and processing aids were followed, holding that such substances do not satisfy the requirement of raw materials or component parts for the purpose of the notification.

Conclusion: The inputs were not eligible for exemption under Notification No. 201/79-C.E. The Revenue's appeal was allowed and the order granting relief to the assessee was set aside.

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