Captive consumption exemption applies to seats used in body-building of duty-paid motor vehicles.

Notification No. 67/95-CE was treated as applicable to seats manufactured and consumed captively in the course of body-building of motor vehicles where duty was paid on the finished body-built vehicles. The analysis states that captive manufacture of the seats formed part of the fabrication activity covered by Rule 57F(3)/(4) of the Central Excise Rules, and that separate duty on the intermediate seats was not warranted when the final vehicles had already suffered duty and no revenue loss arose. On that basis, the duty demand on the captive seats was considered unsustainable.

---

---

Issues: Whether the assessee was entitled to the benefit of Notification No. 67/95-CE dated 16.03.1995 in respect of seats manufactured and consumed captively in the course of body-building of motor vehicles, when duty had been paid on the body-built vehicles.

Analysis: The dispute turned on whether the captive manufacture of seats formed part of the fabrication activity covered by Rule 57F(3)/(4) of the Central Excise Rules. The impugned order followed earlier proceedings in the same line of controversy and noted that where the chassis movement and body fabrication are so covered, separate duty on seats does not arise. It was also noticed that duty had been paid on the body-built motor vehicles and that there was no loss of revenue. On that basis, the exemption under Notification No. 67/95-CE was held applicable to the seats used captively in the manufacture of such vehicles.

Conclusion: The assessee was entitled to the exemption under Notification No. 67/95-CE, and the demand of duty on the captive seats was not sustainable.

Final Conclusion: The Revenue's challenge failed, and the order granting exemption and dropping the duty demand was sustained.

Ratio Decidendi: Where goods are captively consumed in the course of manufacture of final products on which duty is paid, and the activity falls within the relevant fabrication framework, exemption for captive use cannot be denied merely because the intermediate goods are separately manufactured.

---