Factory-captive exemption cannot be denied by reading in restrictions absent from the notification text.

An exemption notification covering goods manufactured and consumed within the factory cannot be narrowed by implying a restriction not found in its text. Goods used captively in the manufacture or maintenance of capital goods remained eligible for exemption, because the notification did not confine use only to production activity; the assessee succeeded on this issue. Goods arising during manufacture of final products were also treated as intermediate products eligible for the same exemption, as the settled view and cited circulars supported that construction; the assessee succeeded on this issue as well. The impugned orders were therefore unsustainable and consequential relief followed.

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Issues: (i) Whether goods manufactured within the factory and used captively in the manufacture or maintenance of capital goods were eligible for exemption under Notification No. 67/95-C.E. dated 16-3-1995; (ii) Whether excisable goods arising in the course of manufacture of final products were to be treated as intermediate products and not as final products for the purpose of the said notification.

Issue (i): Whether goods manufactured within the factory and used captively in the manufacture or maintenance of capital goods were eligible for exemption under Notification No. 67/95-C.E. dated 16-3-1995.

Analysis: The notification exempted goods manufactured within the factory and consumed within the factory. Its language did not impose any restriction that the capital goods must be used only for production of goods and not for maintenance of machinery. In the absence of any express exclusion, denial of the exemption was unwarranted. The earlier decisions and Board circulars relied upon by the assessee supported this construction.

Conclusion: The issue was decided in favour of the assessee and the exemption could not be denied on the ground that the goods were used for maintenance of capital goods.

Issue (ii): Whether excisable goods arising in the course of manufacture of final products were to be treated as intermediate products and not as final products for the purpose of the said notification.

Analysis: The goods emerging during the manufacturing process were covered by the same exemption principle where they were used within the factory in relation to manufacture of capital goods. The cited judicial precedents and Board circulars were treated as directly applicable, and the departmental objections were found inconsistent with the notification and the settled view.

Conclusion: The issue was decided in favour of the assessee and the goods were to be treated as eligible intermediate products for exemption.

Final Conclusion: The impugned orders could not be sustained and the assessee was entitled to the claimed exemption and consequential relief.

Ratio Decidendi: Where an exemption notification covers goods manufactured and consumed within the factory, its benefit cannot be denied by importing a restriction that is not expressly provided in the notification.

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