Captive consumption of intermediate goods entitled the assessee to Cenvat benefit for texturised yarn used in slide fasteners.

Captive use of texturised yarn in the manufacture of slide fasteners satisfied the condition in Rule 57AG(3)(b) of the Cenvat Rules where the intermediate product was produced from polyester filament yarn and consumed entirely in-house for the final product. On the undisputed facts, the assessee met the statutory requirement for captively consumed intermediate goods, so the benefit could not be denied on the reasoning adopted by the Commissioner (Appeals). The denial of credit was therefore unsustainable, and the assessee was entitled to the Rule 57AG(3)(b) benefit.

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Issues: Whether the assessee, who used texturised yarn captively in the manufacture of slide fasteners, was entitled to the benefit of Rule 57AG(3)(b) of the Cenvat Rules.

Analysis: The factual position was not in dispute that the assessee manufactured slide fasteners, used polyester filament yarn to produce texturised yarn, and consumed that texturised yarn entirely in-house as an intermediate product for the final manufacture. Once captively consumed texturised yarn was used for the final product, the condition in sub-rule 3(b) stood satisfied and the benefit could not be denied on the reasoning adopted by the Commissioner (Appeals).

Conclusion: The assessee was entitled to the benefit of Rule 57AG(3)(b), and the denial of credit was unsustainable.

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