Captive consumption exemption upheld for control panel used in CKD clearance and later assembly at buyer's site.

Captive consumption exemption under Notification No. 67/95-CE was available for a control panel used in manufacturing an automatic waste evacuation system cleared in CKD condition and assembled at the buyer's site. The Revenue argued that the panel lost its captive-use character because integration occurred only after removal from the factory, but the system had already been accepted as manufactured in the assessee's factory and removed on payment of duty. On that basis, the control panel was treated as captively consumed for manufacture of the dutiable final product, and the exemption claim succeeded.

---

---

Issues: Whether the control panel was eligible for captive consumption exemption under Notification No. 67/95-CE when the automatic waste evacuation system was cleared in CKD condition and assembled at the buyer's site.

Analysis: The Revenue's case rested on the assertion that the control panels were integrated into the mechanical system only at the buyer's site and therefore could not be treated as captively consumed in the factory. The clearance of the complete system on payment of duty under SH 8448.10 was accepted by the Department, showing that the system had been manufactured in the assessee's factory and removed in CKD condition. On that basis, the component control panel could not be denied the character of captively used goods merely because final assembly took place at the buyer's site.

Conclusion: The control panel was held to have been captively consumed for the manufacture of the dutiable final product and the exemption claim succeeded.

---