Captive exemption fails where final products become exempt and prior Cenvat credit availed, with extended limitation upheld.

Captively consumed intermediate goods lost exemption once the final products became exempt under Notification No. 30/04, because Notification No. 67/95-CE applied only while the final products remained dutiable or otherwise outside nil-rate exemption. The reversal of Cenvat credit did not cure the original ineligibility where credit had been availed at the outset, and the alternative exemption was also unavailable for that reason. Non-furnishing of quantity and value particulars despite repeated requisitions justified the extended period of limitation. On the same findings of non-disclosure and duty liability, penalty under section 11AC and interest under section 11AB were sustained.

---

---

Issues: (i) Whether the intermediate goods used captively were entitled to exemption under Notification No. 67/95-CE or Notification No. 30/04 after the final products became exempt; (ii) whether the demand was barred by limitation and whether penalty and interest were sustainable.

Issue (i): Whether the intermediate goods used captively were entitled to exemption under Notification No. 67/95-CE or Notification No. 30/04 after the final products became exempt.

Analysis: Notification No. 67/95-CE exempted inputs used within the factory only so long as the final products were not fully exempt or chargeable to nil rate of duty. Once the assessee opted for Notification No. 30/04 and the final products became exempt, the condition in Notification No. 67/95-CE was attracted and the captively consumed intermediate goods lost the benefit of that notification. Notification No. 30/04 also denied exemption where credit on inputs had been taken under the Cenvat Credit Rules. The reversal of credit did not alter the fact that credit had originally been availed, and the Tribunal preferred the view that such subsequent reversal did not restore entitlement to exemption. The cited precedent on captive use was distinguished because the relevant notification there did not contain a comparable disqualifying condition.

Conclusion: The intermediate goods were not entitled to exemption under either Notification No. 67/95-CE or Notification No. 30/04.

Issue (ii): Whether the demand was barred by limitation and whether penalty and interest were sustainable.

Analysis: The assessee did not furnish the quantity and value particulars sought by the department despite repeated requisitions, and the department worked out the demand on the basis of available records. In those circumstances, invocation of the extended period was justified. Since the duty demand was upheld on merits and suppression/ non-disclosure was found, the penalty under section 11AC and interest under section 11AB were also sustained.

Conclusion: The demand was held to be within limitation, and the penalty and interest were upheld.

Final Conclusion: The appeal failed in entirety and the duty demand, interest and penalty were sustained.

Ratio Decidendi: Where an exemption notification expressly conditions relief on the final products being dutiable or on non-availment of credit, subsequent reversal of credit does not cure the original ineligibility, and the extended period may be invoked when the assessee withholds material consumption data.

---