TMI Blog2008 (9) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... g grounds :- (a) that certain varieties of goods were cleared into DTA at lower assessable value than the average cost of production, resulting in contravention of the provisions of Rule 100E and 100D of the Central Excise Rules read with Notification No. 2/95-CE., dated 4-1-95; (b) that the goods were not manufactured wholly out of indigenous raw materials, but also out of the imported chemical/raw materials namely 'Dilasoft' resulting in violation of condition of Notification No. 8/97-C.E., dated 1-3-97. 2. By 2 separate Orders-in-Original dated 24-3-99 the Adjudicating authority dropped the proceedings initiated against the assessees holding that in the case of valuation of goods manufactured by 100% EOU and cleared into DTA, the invoice price is available to the proper officer and unless it is proved that the said invoice price is not the actual transaction value, the same is acceptable in terms of the provisions of Rule 8 of the Revised Customs Valuation Rules, 1988 for the purpose of assessment in the light of Circular F. No. 330/46/97-CX, dated 20-8-97, and holding that the use of Dilasoft which is a consumable does not disentitle the assessee to the benefit of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the quantity of material used for manufacture of finished goods and as such, the assessee's plea that imported chemical "Dilasoft" is a consumable, would not hold good as no corroboratory evidence has been produced by them to establish the use of "Dilasoft" as other than raw material. (3) The assessee has contravened Rule 100D 100E of CER, 1944. (4) The assessee has not adopted FOB. value of exports in respect of clearances of Terry Towels into DTA. (5) The Assessee has cleared the goods into DTA in excess of the quantity permitted by the Development Commissioner. 3. We have heard both sides. 4. We first take up the additional ground permitted to be raised by the Revenue viz, that the provisions relating to quantity restriction applicable to normal goods as laid down in Para 9.9(b) of the 1992-2002 Exim Policy would not be applicable to such goods and the restriction laid down in Para 9.9.(a) read with sub-clause (iii) of the third proviso to Notification No. 2/95-C.E., dated 4-1-95 as amended by Notification No. 100/95-C.E., dated 2-6-95 would be applicable to such goods viz, that the benefit of Notification is available only upto 5% of the value of productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the 14th September, 1992 upto a value not exceeding forty percent of the value of production of components and finished goods manufactured, in the case of a Electronic Hardware Technology Park (EHTP) unit; notification of the Government of India in the Ministry of (iii) Commerce No. 33/(RE)/92-97, dated the 22nd March, 1994, upto a value not exceeding twenty-five percent of the value of production of software manufactured in the case of a Software Technology Parks (STP) unit, from so much of the duty of excise leviable thereon under section 3 of the said Central Excises and Salt Act as is in excess of the amount calculated at the rate of fifty per cent of each of the duties of customs, which would be leviable under section 12 of the Customs Act, 1962 (52 of 1962) read with any other notification for the time being in force issued under sub-section (1) of section 25 of the said Customs Act on the like goods produced or manufactured outside India if imported into India: Provided that the amount of duty payable in accordance with this notification in respect of the said goods shall not be less than the duty of excise leviable on the like goods produced or manufactured outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 2/95-Central Excises, dated the 4th January, 1995, namely:- In the said notification,- (A) for clause (ii) and clause (iii), the following clauses shall be substituted, namely "(ii) notification of the Government of India in the Ministry of Commerce No. 4(RE-95)92-97, dated the 30th April, 1995." (iii) notification of the Government of India in the Ministry of Commerce No. 5/(RE-95)/92-97, dated the 30th April, 1995." (B) for the third proviso, before the "Explanation", the following provisos shall be substituted, namely "Provided also that -: (i) in the case of said goods, other than software, rejects, scrap, waste or remnant,- (a) such goods being cleared for home consumption are identical in all respects with the goods exported or expected to be exported from the unit during a specified period for such clearances in terms of the Export and Import Policy, 1st April, 1992 - 31st March, 1997; (b) the value of such goods being cleared for home consumption from the unit specified in Column (2) of the Table hereto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e functions and to be commercially-interchangeable," shall be substituted." 7. In view of the finding that goods cleared into DTA are not identical to export goods but are rejects and wastes, the eligibility to the benefit of Notification 2/95-C.E. to any quantity in excess of that permitted there under is required to be considered. Since, there is no proposal in the show cause notice to disallow the benefit of Notification on this ground, and no finding therefore recorded thereon, the interest of justice require this issue be remanded to the adjudicating authority for decision after extending a reasonable opportunity to the assessee of being heard in their defence. 8. As regards valuation, the lower Appellate Authority has recorded a clear finding that Terry Towels in Grade I, II IV cleared into DTA are assorted defective lots which are not export worthy and therefore the question of adopting F.O.B. value of exports of Terry Towel by the assessees does not arise. He has found as under:- Grade. I : Terry Towels manufactured from dyed yarns comes under this category. All left over towels from expert quality due to various defects, viz, no guarantee of assortment, colou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into and form part of manufacturing process or is required to make the article marketable must be deemed to be raw material or component part of the end product and must be deemed to have been used in completion or manufacture of the end product. He also cites decision of the Tribunal in CCE, Coimbatore v. Meridian Industries Ltd. - 2007 (217) E.L.T. 576 holding that imported Wax disc is used for lubrication of cotton yarn to facilitate its winding on cones and is used in knitting hosiery is not consumable but raw material and therefore the cotton manufactured with imported wax is not eligible to the benefit of concessional rate of duty in terms of Notification No. 8/97-CE. He also refers to the definition of softener in the Condensed Chemical Dictionary by J.L Sharma Nand Kishore Garg, which states that softener may be added during the processing for facilitating operations or it may be present in the finished product. 10. On the other hand, the ld. counsel for the respondents contends that Dilasoft is a consumable and use of imported consumables will not debar the respondents from the benefit of the Notification, as clarified by the CBEC Circular No. 389/22/98, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent of and outside the end products and those, as here, which might be burnt up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called raw material" for the end product. One of the valid tests, in our opinion, could be that the ingredient should be so essential from the chemical processes culminating in the emergence of the desired end product, that having regard to its importance in an indispensability for the process, it could be said that its very consumption on burning up is its quality and value as raw material. In such a case, the relevant test is not its absence in the end product, but the dependence of the end product for its essential presence at the delivery end of the process. The ingredient goes into the making of the end product in the sense that without its absence the presence of the end product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilization is in the manufacturing process as distinct from the manufacturing apparatus". 15. It is to be noted that cost of dye varied between 2 and 2.5% o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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