Captive inputs used for exempt final products were included in aggregate clearances under the exemption notification.

Captively consumed plastic film and plastic laminated film used within the factory to manufacture exempt plastic pouches were included in the aggregate value of clearances for exemption under Notification No. 8/99-CE. The notification excluded specified goods used as inputs for further manufacture of specified goods within the factory, but the exclusion in Entry 1(i) was applied plainly and did not extend to inputs used for making a final product that was itself exempt from duty. On that basis, the captive clearances remained includible and the demand was confirmed against the assessee.

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Issues: Whether the value of plastic film and plastic laminated film captively consumed within the factory for manufacture of exempted plastic pouches was to be included in the aggregate value of clearances for the purpose of exemption under Notification No. 8/99-CE dated 28.2.1999.

Analysis: The exemption notification excluded from the aggregate value of clearances those specified goods which were used as inputs for further manufacture of any specified goods within the factory of production. Entry 1(i) in the Annexure also excluded goods which were chargeable to nil rate of duty or were exempt from the whole of the duty of excise leviable thereon. The plastic pouches manufactured by the appellants were exempted from duty at the relevant time, and the exclusion in Entry 1(i) was read in a plain and simple manner. On that basis, the captively consumed plastic film and plastic laminated film used for making such exempted pouches could not be excluded from the aggregate value of clearances.

Conclusion: The captive clearances were includible in the aggregate value of clearances and the demand was rightly confirmed against the assessee.

Ratio Decidendi: Where the final product is exempt from duty, inputs captively used to manufacture that exempted product are not excluded from the aggregate value of clearances under the exemption notification unless the notification expressly provides otherwise.

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