Judgment

A.K. Sikri, J.

The appellant-assessee is engaged in the manufacture of cotton yarn which is 100% Export Oriented Undertaking (EOU) constituted as per Export and Import Policy 1997-2002. During the period August, 2000 to March, 2001, it had cleared the aforesaid cotton yarn made to Domestic Tariff Area (DTA). While clearing these goods, the appellant did not pay normal excise duty that is chargeable for the aforesaid product. Instead it took benefit of Notification No.8/97-C.E. dated 01.03.1997 and paid duty at concessional rate in terms of the said notification. This notification provides for concessional rate to those products which are cleared to DTA by an EOU. However, one of the conditions for availing the benefit of the said notification is that the products that are manufactured by such EOU should have been manufactured using indigenous raw material only.

2. The appellant while manufacturing cotton yarn had used indigenous cotton and also imported wax. The Department sought to deny the benefit of Notification No.8/97-C.E. on the ground that imported wax was also used, which was treated as the “raw material”. Show cause notice dated 04.09.2001 was, accordingly, issued by