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2023 (6) TMI 658 - CESTAT MUMBAIExemption from duty - Eligibility of ‘polyethylene (PET) granules’ used in testing of ‘moulds’ manufactured - N/N. 52/2003-Cus dated 31st March 2003 - alleged wrong availment of exemption accorded to ‘inputs’ required for manufacture of goods intended for export even though the impugned ‘polyethylene (PET) granules’ were actually utilised for testing their machines - HELD THAT:- The definition of ‘consumables’ in paragraph 9.15 of the Foreign Trade Policy (FTP) is broad enough to cover goods that do not go into the final product but, nonetheless, is essential to the final product. An untested product, especially custom-made, as held in re Flex Engineering Ltd, is not a product that will be accepted by the customer and, therefore, undeniably rendering the raw materials used for test production as ‘consumables’ eligible for exemption. The output of test of manufactured ‘capital goods’ is distinguishable from test run of ‘installed machinery’ which precedes actual commercial production and it would appear that the jurisdictional authorities were unable to appreciate the distinction which shifts an input from ‘raw material’ to ‘consumables’ for the purposes of the impugned notification. The clubbing of all of these as ‘inputs’ for the purpose of accountal of eligible quantities of each does not exclude any type of goods used in production and the jurisdictional authorities have not been able to show that the ‘standard input output norms (SION)’ have not been conformed to - That the ‘polyethylene (PET) granules’ deployed in production of goods in trial run of moulds manufactured by the appellant have been considered as ‘inputs’ for manufacture between March 2010 and March 2013 for the purposes of CENVAT Credit Rules, 2004. These are, thereby, procured for manufacture of output and it is not open for Revenue to adopt a contrary stand merely for denial of exemption on procurement under a scheme of the Foreign Trade Policy (FTP). Considering that ‘polyethylene (PET) granules’ are used during the manufacture of ‘moulds’ that are the acknowledged export product of the appellant and which, even if not deployed in manufacture of mould, renders the acceptability of the goods for the customer in the absence of which export obligation would remain unfulfilled, it is nothing but ‘consumables’ which are covered by the omnibus enumeration of eligible requirements other than capital goods, the impugned order has erred in denying the benefit of exemption. The impugned order is set aside - appeals allowed.
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