Per Justice K. Sreedharan :

These are two appeals at the instance of the Revenue. Correctness of orders-in-original No. 19 and 20/Commr./lND-l/CEX/99 dated 26-3-99 passed by the Commissioner of Central Excise and Customs, Indore is under challenge. As per the said order, Commissioner allowed the two manufacturers (respondents herein), namely, M/s. Century Denim and M/s. Maral Overseas Ltd. benefit of Notification No. 8/97 dated 1-3-1997.

2. Respondents in these cases are 100% EOU engaged in the manufacture of cotton fabrics. Century Denim manufacture cotton denim fabrics. Respondent in the other case, namely, Maral Overseas Ltd. are engaged in the manufacture of cotton yarn, cotton fabric and garments. These companies export substantial quantity of their goods to foreign countries. Main Raw material required for the manufacture of denim or yarn and fabric, as the case may be, is cotton entirely purchased locally. According to the manufacturers, the entire raw materials for the manufacture of the finished goods are procured from domestic market and not imported. Notification No. 8/97 prescribed concessional rate of duty for finished goods manufactured by the EOU and allowed products to be sold in India on the condition that the whole raw material should be produced or manufactured in India. On the ground that the goods were manufactured utilizing domestic material, they cleared their goods availing the concession in terms of Notification No. 8/97.

3. Show cause notices were issued by the Commissioner contending that indigo pure dye used in the manufacture of denim was an imported raw material and so the denim fabric cannot claim the concession in terms of Notification No. 8/97. Similarly, in the case of Maral Overseas Ltd., it was contended that they are not entitled to the benefit of the notification, because wax, lycra and other findings and trimmings which were imported were utilized in the manufacture of cotton yarn, fabric and garments and thereby the benefit of Notification No. 8/97 cannot be availed of. Action proposed by the show cause notices was opposed by the manufacturers. They contended that the indigo pure dye, lycra and other imported fixing agents were consumables and not raw materials and so the finished products were covered by Notification No. 8/97. In support of this contention, an affidavit sworn to by Venkatraya Anand Shenai, a Professor and Doctorate Degree-holder in Chemical Technology was made available to the Commissioner. The Commissioner accepted the contention of the manufacturers and dropped the proceedings initiated pursuant to the show cause notices. The said decision is under challenge.

4. In the case of Century Denim, the basic raw material for the production of finished goods is cotton. Cotton used in the manufacture of the finished goods is entirely produced within the country. For manufacture of denim fabrics, they use indigo pure, which is an imported material. Accordingto the Revenue, this indigo pure, an imported material, is a dye used in the manufacture of finished product. Since this imported dye is used as a raw material, the finished product cannot claim the benefit of Notification No. 8/97.

5. M/s. Maral Overseas Ltd. manufacture their finished product, namely, cotton yarn, cotton fabric and garments. The main raw material for production of the finished goods happen to be cotton. This raw material, namely, cotton is entirely purchased from within the country. No part of cotton is imported. But they imported wax, lycra, dyeing and fixing agents, woven interlining, thread, twill tapes, buttons, stickers, etc. These imported articles were used by the manufacturer in getting the finished cotton yarn, fabric, cotton fabric and cotton garments. According to the Commissioner, the above-mentioned imported goods, which went into the production of finished products, are consumables and not raw materials. Consequently, he took the view that the finished products are entitled to the concessiona