Chapter X clearances against CT-2 do not make final goods exempt, preserving Notification No. 67/95-CE for intermediate inputs.

Clearances made under Chapter X against CT-2 certificates for export-related use are treated as supplies under bond, not as goods exempt from duty or chargeable at nil rate. On that basis, intermediate goods consumed in manufacturing the final product do not lose eligibility for exemption under Notification No. 67/95-CE merely because the final goods are cleared through the Chapter X procedure. The text states that this distinction preserves the exemption for the intermediate product and makes any duty demand on it unsustainable.

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Issues: Whether intermediate goods used in the manufacture of final goods cleared under Chapter X procedure against CT-2 certificate under Notification No. 49/94-CE (NT) could be denied the benefit of Notification No. 67/95-CE on the footing that the final goods were exempt or cleared without duty.

Analysis: The clearance of the final product against CT-2 certificate under Notification No. 49/94-CE (NT) was for use in export goods under Chapter X procedure. Such clearances were treated as supplies under bond for export-oriented use and could not be equated with goods exempt from the whole of duty or chargeable to nil rate of duty. Since the final product was not to be treated as exempted goods for this purpose, the intermediate product consumed in its manufacture remained eligible for the exemption contemplated by Notification No. 67/95-CE. The demand on the intermediate product was therefore unsustainable.

Conclusion: The benefit of Notification No. 67/95-CE was available to the intermediate goods, and the duty demand on phosphoric acid was not maintainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the assessee succeeding on the substantive exemption issue.

Ratio Decidendi: Goods cleared under Chapter X against CT-2 certificate for export-related use are not to be treated as exempted or nil-rated goods for denying exemption on intermediate inputs under Notification No. 67/95-CE.

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