ALPS INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE issue involved in this Appeal filed by M/s. Alps industries Ltd. is whether the benefit of Notification No.8/97 -C E dated 1.3.97 is available to the excisable goods manufactured by them and cleared into Domestic tariff Area.

(2.) SHRI L.P. Asthana, learned Advocate mentioned that the Appellants, a 100% Export Oriented Undertaking, manufacture cotton yearn fabrics, made ups etc. that in respect of Domestic Tariff Area clearances, they claimed benefit of Notification No. 8/97 which exempts the goods from payment of so much of the duty of excise as is in excess of an amount equal to the aggregate of the duties of excise leviable on like goods produced or manufactured in India, other than in a 100% Export Oriented Undertaking and Free Trade Zone, subject to the condition that the goods are produced or manufactured wholly from the raw material produced or manufactured in India; that the Appellants imported various consumable items, namely lefasol, indigo powder, PVA, discofix DBA, Ceraperm and resorcinol; that these items were mainly for sizing and for the purpose of dyeing yarn, fabrics or made -ups; that the Commissioner of Central Excise, under the impugned Order, has confirmed demand of duty for the period 1997 -1998 to November 2001 after issuing the show cause notice dated 26.3.02 disallowing the benefit of Notification No.8/97. Learned Advocate submitted that the Government, by its Circular No.389/ -CX Dated 5.5.1998, has clarified that a 100% Export Oriented Undertaking is eligible for the benefit of Notification No.8/97 -C E even if imported consumables are used since the Notification does not debar the use of imported consumables provided other conditions of the Notification are satisfied; that thus the Appellants were under the bonafide belief that the imported items are consumables and are covered by the Government Circular; that the said Circular was withdrawn only by another Circular dated 31.1.2002. and therefore, during the intervening period, they were entitled to the benefit of Notification; that the Joint Development Commissioner, NEPZ also, under letter dated 6.2.2001 addressed to the CCE, Meerut has requested the Department to look into the matter for removing the difficulties being faced by an EOU as the sizing and finishing chemicals used by them are consumables; that the Additional Textile Commissioner under Certificate dated 29.10.2001 has mentioned that the chemicals are substantially consumed during the manufacturing process and hence can be treated as consumables; that in another letter dated 14.6.2002, Additional Textile Commissioner has clarified that chemicals participate in or are required for a manufacturing process, to import functional properties to a textile product but do not significantly form part of the end product, and these chemicals are substantially consumed during the manufacturing process and hence will be deemed as consumables; that the Supreme Court in the case of Coastal Chemicals Ltd. v. CTO, Andhra Pradesh and Ors. (1999 (85) ECR, 825) has held that consumables refers only to materials which is utilised as inputs in the manufacturing process but is not identifiable in the final product because it has been consumed therein. Learned Advocate mentioned that as all the items in the present matter, have been consumed in the manufacture of finished products, they fall within the purview of term consumable; that in terms of EXIM Policy, consumables is any item required for manufacture but not forming a part of the end product whereas raw materials have been defined as any material needed for the manufacture of goods, whether or not they are substantially consumed during manufacture and whether or not they form a part of the end product. Learned Advocate, therefore, contended that the benefit of Notification No.8/97 is available to the products manufactured and cleared by them into Domestic Tariff Area as they have not used any material which is not produced or manufactured in India.

(3.) COUNTERING the arguments Shri O.P. Arora, learned Senior Department Representative, submitted that the items imported by them have been used in the manufacture of their products which have been cleared into the Domestic Tariff Area and as such the benefit of Notification No.8/97 is not available to them; that the chemicals imported by them enhances the finishing utility and value of their products; that the word 'raw material' has been interpreted by the Supreme Court in the case of CCE v. Ballarpur Industries Ltd. (1989) (43) ELT 804 (SC) wherein it has been held that the "ingredients used in the Chemical Technology of Manufacture of any end product might comprise, amongst others, of those which may retain their dominant individual and character throughout the process and also in the end -product; those which, as a result of interaction with other chemicals of ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end product; those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end -product and those, as here, which might be burnt -up or consumed in the chemical reactions." Learned Senior Departmental Representative mentioned that the question before the Supreme court was whether the ingredients of last mentioned clause qualifies themselves as and are eligible to be called "Raw Material" for the end -product; that the test laid down by the Supreme Court was that "the ingredients should be so essential for the chemical processes culminating in the emergence of desired end -product, that having regard to its importance and indispensability for the process, it could be said that its very consumption or burning -up is its quality and value as raw material", that the Supreme Court further held that "in such a case the relevant test is not its presence in the end product but the dependence of the end product for its essential presence at the delivery end of the process." Learned Senior Departmental representative therefore contended that as these chemicals imported by the appellants and used in the manufacture enhanced the utility and value of the product, these are raw -materials making the products eligible for the benefit of exemption under Notification No.8/97. He also relied upon the decision in the case of CCE Guntur v. Asia Peroxides Ltd. [ : 2004 (168) ELT 201 (Tri)].