LexM/S VANASTHALI TEXTILES INDUSTRIES LTD. versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR, RAJASTHAN
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A MIS V ANASTHALI TEXTILES INDUSTRIES LTD. B V. COMMISSIONER OF CENTRAL EXCISE, JAIPUR, RAJAS THAN OCTOBER 26, 2007 [DR.ARIJITPASAYAT AND S.H. KAPADIA,JJ.) Excise duty-Exemption under Notification No. 8197-CE- C Entitlement of-100 % EOU using imported sizing material in manufacture of terry towels-Another I 00% EOU using imported 'Indigo pure' in manuft1cture of denim fabric-First company's case that imported sizing material not raw material but consumable and other company's case that Denim fabric wholly produced from cotton D yarn and Indigo pure not raw material, thus entitled to exemption under Notification-Held: Benefit of Notffication is available when products are manufactured by I 00% EOU wholly from raw material produced and sold in lndia-Onfacts, dominant ingredient test in regard to cost variation not applied-Thus, matter remitted to CEGAT to consider E the same and also whether the items are 'consumable '-Notification No. 8197-CE-Central Excise and Salt Act, I 944. Words and Phrases: 'Consumables' and 'raw materials'- Meaning of -~- \ \ F In the present batch of appeals, appellant-company is 100% }.- Export Oriented Undertaking-'EOU'. In terms of Notification No.8/ 97-CE dated 1.3.1997, goods sold in Domestic Tariff Arca by a 100% EOU were partially exempted from payment of Central Excise Duty provided the goods were manufactured by 100% EOU wholly G from raw material produced or manufactured in India. H Appellant-company in first batch ofappeals procured the raw -1 materials from domestic manufacturers in India and also imported Carboxymcthyle Cellulose which is used for sizing of single yarn to 710 I I > I I V ANASTHALI TEXTILES INDUSTRIES LTD. v. 711 r COMMNR. OF CENTRAL EXCISE, JAIPUR, RAJASTHAN give strength to the yarn during weaving after which the woven A towels are washed to remove completely the sizing materials and Ultra fresh N.M. which is used for anti bacteria and anti fungus treatment of terry towels. Appellant-company claimed the benefit of the Notification. It was appellant's case that the sizing material imported is not raw material but is classified as consumable under B ,k EXIM Policy, which participates in or is required for manufacturing process but does not form part of the end product; that the sizing j material is washed away afte.r weaving and as such it does not form part of the end product at all which is dyed towel or its waste and scrap; and that the Board's Circular No. 389/22/98-CX dated c 5.5.1998 clarified that the benefit of the Notification would also be available even ifimported consumables are used in the manufacture by 100% EOU. The Department relying upon the decision in CCE, ln<for<r v. Century Denim, EOU and CCE v. Ballarpur Industries Ltd. contended that the benefit of Notification was not available as 100% D )' EOU had used the imported articles. Commissioner (Appeals) confirmed the demand of duty on the ground that the sizing material was imported by the company and is raw material, thus, the benefit of Notification was not available. Appellant-company challenged the order. CEGAT granted stay of the recovery of duty and disposed of E the appeals filed by the appellant-company. The appellant-company in other batch of appeals is engaged in the manufacture of cotton yarn and Denim fabric. They are using Indigo pure in manufacture of Denim Fabric which is an imported F -). raw material. The Commissioner, Central Excise and Customs issued notice to the appellant-company to show cause as to why benefit of the Notification be not denied as they are using imported 'Indigo pure' in the manufacture of Denim fabric. The Commissioner holding that the 'Indigo pure' cannot be termed as raw material for G production of Denim fabrics, dropped the show cause notice. In t appeal, CEGAT held that use oflndigo pure was a raw material in the manufacture of denim fibre. High Court relying on the decision in Ballarpur 's case, upheld the order of CEGAT. It held that the finished product is not wholly from basic raw material i.e. cotton but H 712 SUPREME COURT REPORTS [2007] 11 S.C.R. A it has to be treated that the dye is also a raw material which is B imported. . , Hence the present batch of appeals. Allowing the appeals, the Court HELD: 1.1. The word "consumable" takes colour from and must be read in the light of the words that are its neighbours "raw material", "component part", ""sub-a
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