2026-VIL-1110-CESTAT-BLR-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Duty exemption for Capital goods used in quarrying operations by EOU - Scope of 'manufacture' under EOU scheme – Appellant-EOU imported capital goods duty-free and utilizes them for excavating granite blocks at the quarry site, which are subsequently transported to the main unit for further processing, cutting, polishing and manufacturing into granite articles for export – Demand of duty on the imported capital goods and indigenous materials, contending that they were not used in manufacturing activities as contemplated under the exemption Notification No.13/81-Cus. dated 9th February 1981 - Whether capital goods imported by an EOU under duty exemption Notifications can be utilized for quarrying of granite blocks at a location included as an additional manufacturing center in the Letter of Permission – HELD – The quarrying activity is covered under the definition of 'manufacture' under the Export and Import Policy, 1997-2002, which specifically includes mining as part of manufacture. The Mines Act, 1952 defines mining to include excavation for obtaining minerals, which encompasses quarrying. The capital goods are integral to the manufacturing process as they are essential for obtaining the basic raw material, namely granite blocks, which form the foundational input for the final manufactured products to be exported - The materials required for the purpose of manufacture are not limited to those directly used in the manufacturing process but include materials required in order to manufacture the resultant products. Machinery playing an integral role in the process of manufacture without which the finished goods could not have been produced should be treated as machinery used in manufacture – Further, the unit has obtained all necessary approvals at every stage of removal, transport and dispatch of goods from one location to another, and all activities were undertaken with specific intimations to concerned authorities - The utilization of imported capital goods for quarrying to obtain basic raw materials necessary for manufacturing the exported products does not violate the exemption conditions, as the quarried granite blocks form an integral part of the manufactured articles subsequently exported - The impugned order demanding customs and excise duty is set aside and the appeal is allowed
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