Captive-use exemption denied for intermediate fabrics where the final hosiery product enjoyed SSI exemption and the fabric exemption had lapsed.

Intermediate processed wrap and circular knitted cotton fabrics were held dutiable because the relevant exemption for those fabrics had been withdrawn from 01.04.2003. Notification No. 67/95 was unavailable where the final product, cotton hosiery undergarments, enjoyed SSI exemption under Notification No. 8/2003, since that notification does not apply when the final product is exempt from the whole of duty or chargeable at nil rate. The intermediate goods therefore could not claim captive-use exemption and were subject to duty.

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Issues: Whether the intermediate product, namely processed wrap and circular knitted cotton fabrics, was dutiable and whether the benefit of Notification No. 67/95 was available when the final product was exempt under Notification No. 8/2003.

Analysis: The final product, cotton hosiery undergarments, was admittedly covered by the SSI exemption under Notification No. 8/2003. The dispute was confined to the intermediate fabrics used in manufacture. Those intermediate goods were not covered by the relevant exemption during the material period, and the exemption earlier available to the fabric was withdrawn with effect from 01.04.2003. The exemption under Notification No. 67/95 was unavailable because that notification does not apply where the final product is exempt from the whole of duty leviable thereon or is chargeable to nil rate of duty. As the final product enjoyed exemption for the first clearances, the intermediate goods could not claim the benefit.

Conclusion: The intermediate products were rightly subjected to duty, and the assessee was not entitled to exemption under Notification No. 67/95. The appeal fails.

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