MERIDIAN INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellant-assessee is engaged in the manufacture of cotton yarn which is 100% Export Oriented Undertaking (EOU) constituted as per Export and Import Policy 1997-2002. During the period August, 2000 to March, 2001, it had cleared the aforesaid cotton yarn made to Domestic Tariff Area (DTA). While clearing these goods, the appellant did not pay normal excise duty that is chargeable for the aforesaid product. Instead it took benefit of Notification No.8/97-C.E. dated 01.03.1997 and paid duty at concessional rate in terms of the said notification. This notification provides for concessional rate to those products which are cleared to DTA by an EOU. However, one of the conditions for availing the benefit of the said notification is that the products that are manufactured by such EOU should have been manufactured using indigenous raw material only.

(2.) The appellant while manufacturing cotton yarn had used indigenous cotton and also imported wax. The Department sought to deny the benefit of Notification No.8/97-C.E. on the ground that imported wax was also used, which was treated as the "raw material". Show cause notice dated 04.09.2001 was, accordingly, issued by the Superintendent of Central Excise, Pollachi-II Range, in O.C. No.777/2001 to state that the appellant was wrong in claiming the benefit of Notification No.8/97-C.E. dated 01.03.1997 since cotton yarn was manufactured out of indigenous cotton and imported wax, as wax was contained in the final product (yarn). It was stated that the appellant is maintaining separate production account for manufacture of cotton yarn both for indigenously procured and imported cotton as detailed in Annexures-I and II to the show cause notice. The appellant filed objections/reply dated 29.01.2001 wherein it stated that:

(3.) The Commissioner of Central Excise, Coimbatore after hearing the matter, passed the Order-in-Original dated 21.06.2002 deciding the matter in favour of the assessee and, thus, dropped proposed demand in the show cause notice by recording the finding to the effect that: