1. This appeal arises from Order-in-Original No. 9 / 2004 dated 12.7.2004 passed by the Commissioner of Central Excise, Belgaum. The appellant is a 100% EOU engaged in the manufacture of Combed Grey Cotton Yarn of various counts falling under CH 5205 of the Schedule to CET Act. The Cotton Yarn manufactured in the factory is cleared for export as well as for Domestic Tariff Area (DTA). The DTA clearances are being effected on the basis of the permissions given by the Assistant Development Commissioner, Cochin Export Processing Zone, Sub-Office, Bangalore, from time to time. The said DTA clearances were done by availing the benefit of Notification No. 8/97-CX dated 1.3.1997 and duty discharged in terms of the Notification. The Department initiated proceedings and contended that the assessee had wrongly availed the said notification by suppressing the fact of using certain imported raw materials in the manufacture of Cotton Yarn cleared to the DTA. The appellants were importing Wax, which they considered it as a 'Consumable' and not as a 'Raw materials'. The department has proceeded to consider it as 'Raw Material' for denying the benefit. The appellants' contention is that in terms of the Board's Circular and clarification, if Consumables are used, then they are not disentitled from the benefit of the Notification. The appellants have strongly relied on the experts' evidence from South India Textile Research Association (SITRA). The SITRA, in their report, have clearly indicated that the application of wax to a warp sheet is to improve its weaving performance. They also clarified that the same is not a raw material, but it is a consumable. One Shri B.P. Todankar, Senior Textile Technologist of the Bombay Textile Research Association has also, in his cross-examination, clearly stated that raw material is used for the manufacturing of a product, which will remain as a part of the product till its life time whereas consumables are used or spent or exhausted during a manufacturing process. He has stated that the wax used on the yarn is required to be considered as a Consumable item and it cannot be considered as a Raw material. It has been further clarified that the said wax is also removed before it is sent for dyeing, as stated by Dr.
K.P. Chellamani, Deputy Director of SITRA in his cross-examination. Dr.
Chellamani has also stated that wax is not used as a raw material and nobody in the textile market explicitly call as wax yarn. He has also stated that the wax is consumed in the manufacturing of yarn and yarn can be manufactured without wax.
The learned Counsel referring to the entire material on record submits that the item is not a Raw material as it is not essential for manufacture of yarn. The Textile Ministry has also given a clarification that Wax cannot be treated as Raw material of knitting yarn. He refers to the Tribunal ruling rendered in the case of Nahar Spinning Mills v. CCE, Bhopal, 2002 (149) ELT 498(Tri.-Del.) wherein it has been clearly held that synthetic wax roller used for in the manufacture of yarn is a Consumable. He submits that this judgment clearly applies to the facts of the case and the appeal is to be allowed on merits. Even on limitation, the learned Counsel submits that the entire activity of the appellants was within the department's knowledge as it was under physical control. The learned Counsel also refers to Apex Court judgment rendered in the case of CCE v. Ballarpur Industries Ltd., wherein the Apex Court has clearly laid down that the test to consider a raw material is that it should be essential for the emergence of the desired end product. He submits that in the light of this judgment, the yarn can be manufactured without wax and ultimately wax is also removed. In terms of the technical evidence produced, it has to be considered only as a Consumable. They had been importing the same regularly from 1994 and there was no question of suppression of any fact in the matter.
2. The SDR contested the case very seriously. He referred to the written submissions filed by the department. He also relied on the Ballarpur Industries case (cited supra) to show that the item is required to be considered as Raw material. He referred to the case of CCE v. Century Denim (EOU), 2001 (129) ELT 657 (Tri.-Del.) wherein Imported Indigo Pure dye, fixing agents, woven interlining, thread, twill tape, buttons, stickers etc. were all considered as raw materials. He also referred to the case of CCE v. Asia Peroxides Ltd., 2004 (168) ELT 201 (Tri.-Bang.) wherein raw materials used were considered to be dis-entitled to the benefit of Notification No. 8/97.
He further refers to the CCE v. L.M.P. Precision Engineering Co. Ltd., to submit that there was mis-declaration and details have not been filed and hence larger period was invokable. On the same point reliance was placed on CCE v. Hindustan Zinc Ltd., and that of T.T.G. Industries Ltd. v. CCE, 2004 (167) ELT 501 (SC) and Nizam Sugar Factory v. CCE, Hyderabad, 1999 (114) ELT 429 (Tri.-LB); Madras Petro-Chem. Ltd. v. CCE, Madras, 1999 (108) ELT 611 (SC). The learned Counsel distinguished these judgments and relied on the Apex Court judgment rendered in the case of CCE v. Reliance Silicones Ltd., 2004 (65) RLT 655 (SC) wherein the Apex Court has held that when test results are available, they are best evidence as against market enquiries. He also relied on Polyglass Acrylic Manufacturing Co.
Ltd. v. CC, 2003 (86) ELT 505 (SC) : 2003 (153) ELT 276 (SC) which lays down that reports obtained by department itself has greater force and it should not be ignored. He also relied on the judgment rendered in the case of CCE v. Maral Overseas Ltd., 2004 (166) ELT 498(Tri.-Del.), wherein the Tribunal has held that when department has supervised the production including the receipt and issuances of duty free imported raw material from warehouse, then it cannot be said that there was suppression in the matter. Reliance was also placed on Ugam Chand Bhandari v. CCE, 2004 (167) ELT 491 (SC) with regard to the bona fide belief held by the party in view of the departmental clarifications and Notifications issued. The learned Counsel also relied on the judgment in the case of J.K. Synthetics Ltd. v. CC, 3. On a careful consideration, the point that is required to be considered in this appeal is as to whether the Wax used for grazing the yarn is to be considered as a 'Raw material' or as 'Consumable?'. The experts' evidence on record clearly demonstrates that Wax is a Consumable and not a Raw material. Even in terms of Apex Court judgment rendered in the case of Ballarpur Industries Ltd. (cited supra), the raw material is essential for the end product. The experts, as noted, have clearly stated that Raw material will remain with the product till the end of its life. The Tribunal, in the case of Nahar Spinning Mills, has clearly held that the item Wax, used for grazing the yarn or the yarn being coated with Wax is only a Consumable. Furthermore, in terms of the experts, the wax is removed thoroughly before dyeing as stated by Dr. K.P. Chellamani, Deputy Director of SITRA. The evidences of Dr.
K.P. Chellamani and Shri S.K. Patra, Director of Textile Ministry had clearly opined that the item is not a Raw material. The evidence of Shri B.P. Todankar, Senior Textile Technologist of the Bombay Textile Research Association is also in favour of the appellant. In view of the enormous evidence on record, the appellants contention that wax is Consumable is required to be accepted. In terms of the Board's Circular No. 389/22/98-CX dated 5.5.1998 and Circular No. 631/22/02-CX dated 28.3.1996 clarifying that Consumables are not raw materials and its use will not dis-entitle the benefit of the Notification in question, the appellants' prayer for setting aside the impugned order is required to be upheld. Even on time bar, the appellants have made out a strong case in their favour.
The appellants were using imported wax and its use was within the knowledge of the department as is clearly borne out from the records.
The Superintendent, by his letter dated 16.2.1999 had asked the appellant as to whether they were using any imported material. The appellants had clarified about the use and the department was aware of the use of this Wax in terms of the declarations and various correspondences them (sic) had with the department. The appellants' industry was also under control of the department. In the circumstances, it cannot be said that there are suppressions in the matter and the department was unaware of the use of Wax. Therefore, in the light of the judgment cited by the learned Counsel, the demands are required to be held as time barred. The appellants succeed both on merits as well as on time bar. The appeal is allowed with consequential relief, if any.