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CX - When the Ministry of Commerce treats Imported Paper Cone as packing material explicitly, CE department cannot treat same as 'raw material' - benefit of notfn. 8/97-CE is admissible to cotton yarn cleared into DTA: CESTAT

By TIOL News Service

MUMBAI, JUNE 30, 2016: THIS is a Revenue appeal filed in the year 2005 and the matter came up for hearing recently.

The issue involved is whether the respondent is eligible to avail the benefit of Notification 8/97-CE dated 1.3.1997 which inter alia grants exemption in the following manner -

…exempts the finished products, rejects and waste or scrap specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and produced or manufactured , in a hundred per cent export-oriented undertaking or a free trade zone wholly from the raw materials produced or manufactured in India , and allowed to be sold in India under and in accordance with the provisions of paragraphs 102 and 114 of the Export and Import Policy 1 April 1992 - 31 March 1997…

The facts are that the respondent is a 100% EOU manufacturing cotton yarn and used imported paper cones for winding of yarn. It is the case of the Revenue that the respondent having used imported paper cones for winding of yarn is ineligible for the benefit of exemption notification 8/97-CE on the ground that the imported paper cones are raw materials.

Whereas the Adjudicating authority held against the assessee, the Commissioner(A) reversed the decision and held that paper cones being packing materials , the benefits of notification 8/97-CE as claimed by the assessee are to be extended; accordingly allowed the appeal.

The AR spelt out the ground for denying the exemption as contained in the appeal.

The respondent assessee submitted that the Notification 8/97-CE only bars usage of "raw materials", however, paper cones are ‘packing materials' as evidenced by them.

The Bench observed that the Revenue has no case as -

++ Firstly, it is evidenced by the respondent that imported paper cones are packing materials by producing letter no. SEEPZ/Gov/187/96/02-03/305 dated 13.05.2003 that the paper cones are packing materials. When the Ministry of Commerce, another Ministry of Government of India, treats the paper cones as packing material explicitly, it cannot be said that they are "raw materials" as envisaged in notification 8/97.

++ Secondly, as correctly held by the first appellate authority, expression "raw materials" is a material used in manufacture of goods; in the case in hand wherein cotton yarn is manufactured paper cone cannot be held as "raw material" as it is undisputed that cotton yarn on completion of manufacture is wound on the paper cones.

++ Thirdly, the respondent as well as Ministry of the Government of India has understood that paper cones are packing materials, and were permitted to import the same as such without payment of duty.

++ Fourthly, the findings of the first appellate authority in paragraph 9 of the impugned order are not controverted by the Revenue effectively by any evidence.

The Revenue appeal was rejected.

(See 2016-TIOL-1578-CESTAT-MUM)


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