LexM/S. MERIDIAN INDUSTRIES LTD. versus COMMISSIONER OF CENTRAL EXCISE
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[2015] 14 S.C.R. 35 · M/S. MERIDIAN INDUSTRIES LTD. v. COMMISSIONER OF CENTRAL EXCISE (Civil Appeal No. 4112 of 2007) OCTOBER 27, 2015 [A. K. SIKRI AND R. F. NARIMAN, JJ.] A B Central Excise Act, 1944: Export and Import Policy c 1997-2002 - Notification no.8197-CE dated 01.03.1997 - Benefit of the said Notification available to goods manufactured by EOU using indigenous raw material only - Assessee manufactured cotton yarn using indigenous cotton and imported wax - Entitlement to claim benefit of Notification D no.8197-CE-Held: In the manufacturing process undertaken by assessee-appellant, wax coating is done for luflrication of yarn - Wax coating is allowed to remain on the yarn in order to facilitate its winding on cones and its use in knitting hosiery - No doubt, cotton yarn can be produced without E wax as well - However, such cotton yarn without wax would be of inferior quality for the purpose of buyer in comparison with cotton yarn coated with wax as the use of cotton yarn with wax thereupon acting as lubricant is much more useful and becomes a value addition making it better quality cotton F yarn, insofar as requirement of the buyer in using such cotton yarn for manufacture of knitted fabircs is concerned~ Therefore, wax is used as raw material and not as consumable, insofar as end product of the assessee is concerned - Benefit of notification not available to assessee. G Interpretation of statutes: Exemption notification - . Interpretation of- Held: To be given strict interpretation and unless assessee able to make out a case in its favour, it is not entitled to claim benefit thereof. H 35 36 SUPREME COURT REPORTS (2015] 14S.C.R. A Words and phrases: Word 'consumable' and raw material' - Connotation of. Dismissing the appeal, the Court HELD: 1. The exemption notifications are to be 8 given strict interpretation and, therefore, unless the assessee is able to make out a clear case in its favour, it is not entitled to claim the benefit thereof. Otherwise, if there is a doubt or two interpretations are possible, one which favours the Department is to be resorted to C while construing an exemption notification. In the instant case, assessee is using imported wax in manufacturing process of its end product i.e. cotton yarn. However, the refutation of the appellant Is that wax is 0 not 'raw material' and it is only used as 'consumable' in the process of manufacturing cotton yarn. The Export and Import Policy 1997-2002, which is applicable in the instant case, defines both the expressions, namely, 'consumables' and 'raw material'. If a particular item E participates in or is required for a manufacturing process, but does not form part of the end product and instead it is specifically or totally consumed during a manufacturing process, the same would be treated as 'consumables'. On the other hand, 'raw F material', inter alia, includes any materials or goods that is required for the manufacturing process for a manufacturer.[Paras 13, 14, 18][46-H; 47-A, B-D; 53-D-E] 2. In the instant case, the article manufactured by G the assessee is cotton yarn made of indigenous as well as imported wax. The wax coating is fou,nd to be essential for lubrication of the yarn and was allowed to remain on the yarn in order to facilitate its winding on cones and its use in knitting hosiery. Wax imparts a H quality whereby the protruding fibres of the yarn are M/S. MERIDIAN INDUSTRIES LTD. v. COMMISSIONER OF 37 CENTRAL EXCISE made to settle uniformly on the surface of the yarn to A enable easy winding. This quality of the yarn is essential for its application in the manufacture of knitted fabrics by the buyers. No doubt that cotton yarn can be produced without wax as well. However, such cotton yarn without wax would be of inferior quality for the B purposes of buyer in comparison with cotton yarn coated with wax as the use of cotton yarn with wax thereupon acting as lubricant is much more useful and becomes a value addition making it better quality cotton yarn, insofar as requirement of the buyer in using C such cotton yarn for manufacture of knitted fabirc is concerned. When matter is examined from this angle, an irresistible conclusion is arrived at, namely, wax was used as raw material and not as consumable, insofar D as end product of the assessee .is concerned. For the assessee, end product is cotton yarn and not knitted hosiery. Knitted hosiery
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