Raw material test for manufacturing inputs: carbon paste qualified for set-off as an essential input in ferro alloy production.

Carbon paste used in the manufacture of ferro silicon and ferro alloys was treated as an essential manufacturing input, not disqualified merely because it may be consumed, burnt up, or altered during the process. Applying the principle that raw material status depends on indispensability to the emergence of the final product, the Tribunal held that continued physical presence in the finished goods is not required. Carbon paste was therefore eligible for set-off under Notification No. 201/79-C.E. as an input in the manufacture of ferro silicon / ferro alloys.

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Issues: Whether carbon paste used in the manufacture of ferro silicon / ferro alloys was eligible as a raw material or input for the benefit of Notification No. 201/79-C.E. and consequent set off of duty.

Analysis: The Tribunal applied the principle that the character of a material as a raw material does not depend on its continued physical presence in the finished product alone, but on whether it is an essential ingredient in the manufacturing process and indispensable to the emergence of the final product. It considered earlier Tribunal views as well as the Supreme Court's approach to raw material in manufacturing, including cases where an ingredient is consumed, burnt up, or otherwise altered during the process yet remains part of the manufacturing input because the end product cannot be produced without it. On that basis, carbon paste was treated as an essential input in the manufacture of ferro silicon / ferro alloys.

Conclusion: Carbon paste is entitled to the benefit of set off under Notification No. 201/79-C.E. as an input in the manufacture of ferro silicon / ferro alloys, and the assessee succeeds.

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