2026-VIL-1060-GUJ-CE
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CENTRAL EXCISE High Court Cases

Central Excise - Cotton Waste generated from imported "Raw Cotton" - Manufactured in India – Benefit of Notification No. 8/97-CE - Assessee, a 100% EOU undertaking engaged in manufacture of ring spun cotton yarn, imported duty-free raw cotton and procured raw cotton from domestic manufacturers. Cotton waste generated during manufacture of ring spun yarn was used for manufacture of open end cotton yarn which was cleared to DTA – Demand of duty on the ground that assessee had wrongly availed benefit of concessional rate of duty under Notification No. 8/97-CE dated 01.03.1997, alleging that open end yarn was manufactured from imported raw cotton hence not eligible for exemption - Whether cotton waste generated from imported raw cotton while producing ring spun yarn and used in manufacture of open end yarn should be considered as manufactured in India for availing benefit of concessional rate of duty - HELD – The cotton waste is a distinct and separate commercial commodity covered under Chapter heading 5202 of Central Excise Tariff Act and should be considered as a separate manufactured goods. When open end yarn is manufactured from cotton waste which is produced in India, such waste constitutes ‘raw material produced in India’ for purposes of the Notification - The expression 'raw materials' means material used in manufacture of goods; open end yarn is manufactured from cotton waste and not from imported cotton. The condition stipulated in the Notification that goods shall be produced wholly from raw materials produced in India stands satisfied - The Supreme Court in Favourite Industries case held that goods manufactured in EOU is duly considered to be manufactured in India. Since cotton waste was manufactured in the appellant's factory and used for open end yarn manufacture, the Notification condition is satisfied – Further, the extended period of limitation cannot be invoked as all facts were in knowledge of department at time of issuance of first SCN and no suppression of fact or misdeclaration with intent to evade payment of duty occurred - The impugned order by the Tribunal is upheld and the appeal of the revenue is dismissed
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