JUDGMENT
A.K. Gohil, J.
1. The petitioner has filed this petition under Articles 226/227 of the Constitution of India for seeking the following, among other, reliefs in the petition:
(i) An order, direction or writ in the nature of certiorary calling for records of the case and after examining validity and legality of the same, the impugned order passed by the Hon’ble Tribunal in Appeal No. E/1805, 1806/2000-D dated 7.2.2001 (Annexure-P/12) be quashed; &
(ii) An appropriate writ, direction or order directing the respondents not to act upon the finding of the Tribunal given as per order dated 7.2.2001 (Annexure-P/12).
2. Brief facts for the disposal of this petition are that the petitioner Co. is a duly incorporated Company. It is a 100% export oriented unit situated in the industrial backward district of Khargone for manufacture of cotton yarn and/or blended yarn. At present the petitioner Co. is engaged in manufacture of cotton yarn and Denim fabric, which is made out of the cotton yarn produced by the petitioner. The Denim Cloth being so manufactured is thus a variety of textile product. The Denim so manufactured is in two varieties, namely coloured Denim and gray Denim. As per petitioner’s case under Chapter 52 of the Central Excise Tariff Act, 1985, which deals with cotton, the Denim fabrics produced by the petitioner is covered by sub-heading 52.07 of the Tariff. Vide Notification No. 8/97 dated 1.3.97, the Government of India has permitted payment of Central Excise duty at the same rate at which goods produced by an EOU, provided the goods are manufactured by a 100% EOU wholly from raw material produced or manufactured in India. It was further submitted in the petition that the petitioner’s product Denim fabrics is wholly produced from cotton yarn and the petitioner Co. is availing the benefit of the aforesaid Notification since 1977.
3. The Commissioner of Central Excise & Customs, Indore issued a notice dated 3.2.98 (Annexure-P/6) to the petitioner Co. to show cause why benefit of this Notification be not denied, as they are using ‘Indigo pure’ in the manufacture of Denim fabrics which is an imported raw material and also for the recovery of Rs. 1,97,11,939 being short duty paid on Dernin fabric cleared in DTS Sales during the period 1.4.97 to 30.1.98 under Rule (2) of the Central Excise Rules, 1944 read with Proviso to Section 11A(1) of the Central Excise Act, 1944 and also for imposing penalty under Section 11AC of the Central Excise Act, 1944 and Rules 173-Q and 209 of the Central Excise Rules, 1944 and also for recovery of interest on the duty short paid and with other directions about the confiscation of the land, building, plant & machinery, materials or any other things under Rule 173-Q(2) and Rule 209(2) of the Central Excise Rules, 1944.
4. On 5.6.98 the petitioner filed reply of the aforesaid show cause notice vide Annexure-P/9 and, thereafter, after hearing the learned counsel for the parties the Commissioner, Central Excise & Customs, Indore, by Order dated 23.6.99 held that since the raw material has not been defined specifically and also nothing has been brought on record to establish that imported ‘Indigo pure’ is a raw material known in common trade parlance, therefore, the ‘Indigo pure’ cannot be termed as raw material for production of Denim fabrics and dropped the show cause notice against which the revenue filed a joint appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi.
5. The Tribunal allowed the appeal filed by the Revenue by order dated 30.1.2001 and set aside the order passed by the Commissioner on 26.3.99 and considered the case in the light of finished product and has held that ‘Indigo pure’, which has gone into the production of the finished product is, thus, the raw material and remanded the case to consider the points of limitation and the quantum of duty, as these points were not considered as the entire proceedings were dropped, against which the petitioner Co. has filed this petition, challenging the aforesaid order of the Tribunal.
6. It is not in dispute before me that by a common order dated 30/31.1.2001 in two cases, one of the petitioner Co. i.e. M/s. Century Textile & Industries Ltd. (EOU) and another case of M/s. Maral Overseas Ltd. were decided by the Tribunal. Against this order the another Co. M/s. Maral Overseas Ltd. filed Civil Appeal No. 4017/2001, before the Supreme Court and by order dated 20.7.2001 the Supreme Court dismissed the appeal at the motion hearing stage itself, by passing the following order:
“The impugned order dated 30th June 2001 of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi does not call for any interference. The appeal fails and is dismissed.”
But the petitioner Co. has filed this writ petition before this Court, challenging the order of the Tribunal. It is also not in dispute before me that, thereafter the Commissioner vide fresh order dated 18.1.2001 has again decided the matter, against which the Company has filed fresh appeal before the CEGAT, which is pending for disposal.
7. I have heard Shri S.S. Ray, learned Senior Counsel for the petitioner at length. Shri A.P. Patankar, appeared for the respondent/Commissioner, Central Excise & Customs and submitted only short arguments in writing. I have also perused the record.
8. Shri Ray, learned Senior Counsel very attractively, strenuously and vehemently submitted before me that the learned Tribunal has not correctly considered the language of Notification and has not considered the effect of this beneficial Notification, whose benefit is available, which has to be given to the petitioner Co. The learned Tribunal has also not considered the scope of the Notification and has wrongly held that ‘Indigo pure’ is a raw material. The intention of the Notification of the Government is to give relief to the 100% EOU plant and not to deny benefit to them. The Tribunal has not considered the words used in the aforesaid beneficial Notification, which start ….. wholly from the ‘raw material’ produced or manufactured in India. He vehemently laid emphasis on word ‘from’ and submitted that in no case ‘Indigo pure’, which is basically an imported dye, can be treated as a raw material. He further submitted that the Tribunal has wrongly placed reliance on the case of Ballarpur Industries Ltd. 1989 (43) ELT 803 (SC). According to him for paper manufacturing the input Sodium Sulphide in the manufacture of paper may be a raw material, but in this case the ‘Indigo pure’ dye may be used for the finished product, but it cannot be termed as wholly from the raw materials produced in India. He has also defined the word ‘raw material’ used in common parlance for the production of Denim fabrics. He submitted the meaning of word ‘from’ citing the law Lexicon, Black Law Dictionary and also submitted that the word ‘wholly from’ has to be interpreted in strict sense. He also cited Simens’ Income Tax IInd Edition, Volume-l, Palkiwala’s Income Tax, G.P. Singh’s Interpretation of Statutes, regarding the strict construction of words and liberal construction of beneficial Notifications and cited various decisions of the Supreme Court that its benefit should be given to the assessee. He also very vehemently argued on the theory of merger of judgments and placed reliance on a decision in the case of Kunhayammed and Ors. v. State of Kerla and Anr., 2000 (72) ECC 681 (SC) : 2000 (6) SCC 359 and submitted that in this case doctrine of merger is not applicable, because the dismissal of appeal of the other party by a non-speaking order is not law under Article 141 and the merger principal will lie where no review will lie between the parties. Since in this case the appeal has been dismissed, therefore, review can lie.
9. His further submission was that the order has been passed in an appeal filed by the order party and there was no similarity in the two cases either on facts or on the question of law. Therefore, the order passed by the Supreme Court in an appeal filed by the other party is not binding on the petitioner Co. as the petitioner Co. has already made a challenge to the said order in writ petition under Article 226 of the Constitution. He also cited the definition of raw material from Schedule-l of the Cost Accounting Records Textile Rules, 1977, according to which a separate stock is to be maintained for raw materials and dyes and chemicals, He further produced Accounting & Auditing Technical Guide on Textile Industry and submitted that for stock accounting a separate account has to be maintained for raw material – cotton purchased yarn based etc. – fordyes and chemicals and submitted very vehemently that the basic raw material for the production of Denim fabric is cotton, which is wholly produced in India, the use of dye is consumable, therefore, the ‘Indigo pure1 dye is not a raw material in any case.
10. In reply, learned counsel for the respondent/Union of India only submitted written arguments by way of synopsis of the case and submitted that the issue has already been decided by the CEGAT, which has not been challenged by the petitioner by way of filing any appeal as prescribed under Section 35L of the Central Excise Act and moreover the Supreme Court has finally decided the matter on 20.7.2001 in the case of other respondents against the same order and on the basis of doctrine of merger the petition has become infructuous and is not tenable. The learned counsel for Union of India did not argue on merits and has not rendered any assistance to the Court on recording a finding on merits.
11. In this case it is not in dispute before me that the basic raw material for production of finished goods is cotton. The cotton used in the manufacture of finished goods is entirely produced or manufactured in India and admittedly the petitioner Co. is using imported ‘Indigo pure’ dye in bringing the Denim fabric as a finished product. Therefore, the short question that arises for consideration in this petition is whether the imported articles used by the manufacturer in bringing out the finished product, are raw materials or not?
12. The expression ‘raw material’ is not a defined term. The meaning to be given to it is the ordinary well accepted connotation in the common parlance of those who deal with the matter, The test has been laid down by the Supreme Court in case of M/s. Ballarpur Industries Ltd. (supra), which is as follows:
“The ingredients used in the chemical technology of manufacture of any end product might compromise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the end product; those which, as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end product; those which like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end products and those, as here, which might be burnt up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called ‘raw material’ for the end product. One of the valid tests, in our opinion, could be that the ingredient should be so essential from the chemical processes culminating in the emergence of the desired end product, that having regard to Its importance in and indispensability for the process, it could be said that its very consumption on burning up is its quality and value as raw material. In such a case the relevant test is not its absence in the end product, but the dependence of the end product for its essential presence at the delivery end of the process. The ingredient goes into the making of the end product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus.
13. Shri Ray, learned Counsel for the petitioner very finely distinguished the application of the said judgment on the facts of this case and submitted that the ratio for the aforesaid judgment in the case of M/s. Ballarpur Industries Ltd. (supra) is not applicable to the facts of this case, because in the said case of Ballarpur Industries Ltd., the presence of Sodium Sulphate, in the manufacture of paper is a must, but in this case the basic raw material for the production of Denim fabric is cotton and use of imported ‘Indigo pure’ dye is negligible and its use is consumable and it is not must for the production of Denim fabric, which is purely a cotton fabric. Therefore, the finished product is not wholly produced or manufactured from imported ‘Indigo pure’ dye, but it is wholly produced or manufactured from cotton, which is wholly produced in India. Therefore, his submission is that the petitioner Co. cannot be denied the benefit of Notification No. 8/97.
14. As per the case of the revenue, the Notification is for finished product, which is the Denim fabric. In fact Denim fabric cannot be produced without the use of dye. The further submission of the Revenue is that as per the case of the petitioner himself they are using imported dye in bringing the end product into existence. Therefore, the end product, which is Denim fabric cannot be manufactured without the use of dye and the Denim fabric cannot be so named. Since the Company is using the imported ‘Indigo pure’ dye, which is an essential raw material for the production of Denim fabric, because in its absence the presence of the end product is impossible.
15. The Tribunal has also considered the matter on the same lines and has held that the use of ‘Indigo pure’ dye is a raw material in the manufacture of Denim fabric. The question which can be considered whether the use of small quantity of imported dye in bringing the end product into existence even in that case whether it can be treated that the finished product has come into existence wholly from cotton. I think it cannot. For the production of Denim fabric basic raw material may be cotton, but if an imported dye is used, in that case dye has also to be treated as raw material and the finished product cannot be treated as wholly produced or manufactured wholly from cotton. Thus, in the light of the aloresaid discussion and also in view of the dictum of the Supreme Court in the case of M/s. Ballarpur Industries Ltd. (supra) the word ‘wholly from…..’ used in the Notification qualifies for raw material, if same quantity of imported dye is used or consumed in bringing the end product/finished product into existence without which Denim fabric cannot be produced then it cannot be argued that the finished product is wholly from or only from basic raw material that is cotton, but it has to be treated that the dye is also a raw material, which is admittedly imported. Thus, the production of Denim fabric cannot be said to be wholly from raw material produced or manufactured In India,
16. Consequently, I do not find any scope for interference in the impugned order passed by the Tribunal, as no case is made out on merits. Accordingly, this petition is dismissed with no order as to costs.