Captive consumption exemption upheld where credit reversal met the 8% requirement for exempt clearances under common-input rules.

Exemption under Notification No. 67/95 was available for electrical laminations captively consumed in the manufacture of stators and rotors cleared at nil duty, because the manufacturer had already reversed credit equal to 8% of the price of the exempted goods cleared against CT-2 certificates. Where common inputs are used for both dutiable and exempt goods and separate accounts are not maintained, Rule 57AD requires payment of 8% of the price of the exempted goods; that condition was treated as satisfied here. Accordingly, denial of exemption for the intermediate product was not justified and the demand on electrical laminations was not sustainable.

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Issues: Whether the benefit of exemption Notification No. 67/95 could be denied in respect of electrical laminations captively consumed for manufacture of stators and rotors cleared at nil rate of duty, when the manufacturer had reversed credit equal to 8% of the price of the goods cleared against CT-2 certificate.

Analysis: The appellants had cleared stators and rotors against CT-2 certificate without payment of duty and had reversed credit equal to 8% of the price of such goods. Rule 57AD required payment of 8% of the price of exempted goods where common inputs were used for both dutiable and exempted goods and separate accounts were not maintained. Since that condition stood satisfied, the denial of exemption for the intermediate product was not justified.

Conclusion: The demand on electrical laminations was not sustainable and the benefit of exemption was available to the assessee.

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