Captively used capital goods in CD manufacture retained Notification 67/95-CE exemption despite exempt final products.

Captively used stampers in CD manufacture were treated as capital goods falling under Chapter 85, not as inputs, so they qualified for exemption under Notification No. 67/95-CE. The disqualification linked to manufacture of exempt final products was held to apply to inputs, not to captively used capital goods, and the benefit of the notification was not lost merely because the finished CDs were exempt. The denial of exemption was therefore unsustainable.

---

---

Issues: Whether stampers used captively in the manufacture of CDs qualified as capital goods and were entitled to exemption under Notification No. 67/95-CE despite the final product being exempt from duty.

Analysis: The stampers were held to fall under Chapter 85 and, on their function in the manufacturing process, were treated as capital goods rather than inputs. The exemption under Notification No. 67/95-CE was applied on the basis that the disqualification relating to manufacture of exempt final products operates against inputs, not capital goods. The conclusion followed the reasoning that captively used capital goods do not lose the benefit of the notification merely because the finished goods are exempt.

Conclusion: The stampers were entitled to exemption under Notification No. 67/95-CE, and the denial of exemption was unsustainable.

---