JUDGMENT

Dr. ARIJIT PASAYAT, J.

1.Leave granted in SLP (C) Nos. 9698/2005 and 8595-8596/2005.

2.Challenge in these appeals is to the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (in short 'CEGAT') disposing of appeals filed by the appellant-company. Challenge before the CEGAT was to the order passed by the Commissioner (Appeals). CEGAT granted stay of the recovery of duty, and took up the appeals for disposal of merits. The appellant-company had challenged the order passed by the Commissioner of Central Excise (Appeals) Jaipur.

3.Background facts in a nutshell are as follows:Appellant-company is 100% export oriented undertaking (in short 'EOU') who claimed partial exemption from duty in terms of Notification NO.8/97-CE dated 1.3.1997 in respect of goods sold in Domestic Tariff Area (in short 'DTA'), which stipulated conditions that the goods have been manufactured wholly from the raw materials produced or manufactured in India. According to the company it procured the raw materials from domestic manufacturers in India and also imported (1) Carboxymethyle Cellulose which is used for sizing of single yarn to give strength to the yarn during weaving after which the woven towels are washed to remove completely the sizing materials and (2) Ultra fresh N.M. which is used for anti bacteria and anti fungus treatment of terry towels. The Commissioner (Appeals) had confirmed the demand of duty on the ground that the sizing materials imported by the company is raw material and as imported raw material has been used, the benefit of Notification No.8/97-CE is not available.

4.According to learned counsel for the appellant the sizing material imported is not raw material but is a consumable as per definition given in para 3.13 of the EXIM Policy. According to the definition of 'Consumable', it means any item which participates in or is required for manufacturing process but does not form part of the end product. Items which are substantially or totally consumed during manufacturing process will be deemed to be consumable. It was submitted that the sizing material is washed away after weaving and as such it does not form part of the end product at all which is dyed towel or its waste and scrap. According to para 3.41 of the Policy, raw material means basic materials which are needed for the manufacture of goods but which are still in a raw nature, unrefined or un-manufactured stage. Reliance was placed on the Board's Circular No.389/22/98-CX dated 5.5.1998 wherein it has been clarified that the benefit of the Notification would also be available even if imported consumables are used in the manufacture by 100% EOU. The sizing material answers the definition of 'consumable' given in the EXIM Policy and, therefore, benefit of the Notification cannot be denied to the appellant.

5.Reliance was placed by the Department upon the decision in CCE, Indore v. Century Denim, EOU (2001 (129) ELT 657) wherein the Tribunal relying upon the decision of this Court in the case of CCE v. Ballarpur Industries Ltd. (1989 (4) SCC 566) held that the benefit of Notification 8/97 is not available as 100% EOU has used the imported indigo pure dye and other articles. Tribunal dismissed the appeals and upheld the views of the departmental authorities. After considering the rival submissions, CEGAT came to hold that the appellant-company is using Carboxymethyle Cellulose which is a sizing material in the manufacture of finished products, which are finally cleared in the DTA. The sizing material is undisputedly imported by it. The benefit of Notification No.8/97 is available only if the products brought only from the raw materials produced or manufactured. The Board's Circular dated 5.5.1998 has clarified that 100% EOU is available for the benefit of the said Notification even if the imported consumables are used since the Notification does not bar the use of imported consumables. Reliance was placed in Ballarpur's case (supra) to conclu