Captive consumption exemption survives for mixed dutiable and exempt clearances when Rule 6 compliance is maintained.

Captive consumption exemption under Notification No. 67/95-C.E. remained available for pig iron and cement used in manufacturing DI pipes where the final products were cleared partly on duty and partly under exemption. The proviso barring inputs used in exempted or nil-rated goods did not apply because the notification preserved manufacturers clearing both dutiable and exempted products if they complied with Rule 6 of the Cenvat Credit Rules, 2002. Payment of the prescribed amount for exempt clearances, or maintenance of separate accounts and inventory for dutiable and exempted goods, constituted sufficient compliance and kept the assessee within the exception.

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Issues: Whether exemption under Notification No. 67/95-C.E. was available to Pig Iron and Cement captively consumed in the manufacture of DI Pipes when the final products were partly cleared on payment of duty and partly under exemption, and whether compliance with Rule 6 of the Cenvat Credit Rules, 2002 brought the case within the proviso to the notification.

Analysis: The inputs and final products fell within the respective entries in the notification. The bar in the proviso applied where inputs were used in exempted or nil-rated final products, but the notification itself carved out an exception for manufacturers of dutiable and exempted final products who discharged the obligation under Rule 6 of the Cenvat Credit Rules, 2002. The record showed that for part of the relevant period the assessee had paid the prescribed amount on the exempted clearances, and for the remaining period had maintained separate accounts and inventory for inputs used in dutiable and exempted goods. This amounted to compliance with Rule 6 and brought the assessee within the statutory exception.

Conclusion: The exemption was correctly allowed and the Revenue's challenge failed.

Final Conclusion: Captive consumption exemption remained available where the manufacturer of mixed dutiable and exempted final products complied with Rule 6 obligations, and the appeal was therefore without merit.

Ratio Decidendi: Where an exemption notification excludes inputs used in exempted final products but expressly preserves a manufacturer who clears both dutiable and exempted final products after complying with Rule 6 of the Cenvat Credit Rules, 2002, the captive consumption exemption cannot be denied solely because part of the final product is cleared under exemption.

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