Captive consumption exemption under Notification No. 67/95-CE depends on Rule 6 compliance where no Cenvat credit is taken.

Captive consumption exemption under Notification No. 67/95-CE is discussed in the context of packing boxes used in the manufacture of exempted final products. The text explains that the benefit is preserved where no Cenvat credit is taken on inputs used in the exempt goods, because Rule 6(1) is satisfied in that situation. Rule 6(2) applies only where credit is availed, triggering separate accounts or equivalent compliance. On the admitted facts, no Cenvat credit had been availed on inputs used for either the final products or the packing boxes, so denial of exemption on the basis of Rule 6(2) was described as unsustainable.

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Issues: Whether the assessee was entitled to exemption under Notification No. 67/95-CE for packing boxes captively consumed in the manufacture of exempted final products when no Cenvat credit was availed on inputs.

Analysis: The exemption for captively consumed inputs is denied where the inputs are used in relation to exempted final products, but the notification itself preserves the benefit if the manufacturer discharges the obligation under Rule 6 of the CENVAT Credit Rules. Rule 6(1) operates where no Cenvat credit is taken on inputs used in exempted goods, while Rule 6(2) applies where credit is availed and separate accounts or equivalent compliance is required. On the admitted facts, the assessee had not availed any Cenvat credit on inputs used either in the final products or in the packing boxes. The condition in Rule 6(1) was therefore satisfied, and denial of exemption on the footing of non-compliance with Rule 6(2) was unsustainable.

Conclusion: The assessee was entitled to exemption under Notification No. 67/95-CE in respect of the packing boxes, and the duty demand was not sustainable.

Final Conclusion: The appeal succeeded, the impugned order was set aside, and the exemption claim for the captively consumed packing boxes was upheld.

Ratio Decidendi: Where a manufacturer does not avail Cenvat credit on inputs used in exempted goods, compliance with Rule 6(1) is sufficient to retain the benefit of a captive consumption exemption, and denial cannot be founded on non-application of Rule 6(2).

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