Captive consumption exemption under Central Excise law barred duty on intermediate goods used to make exempt drugs.

An intermediate product captively consumed within the factory for manufacture of exempt final goods was held not liable to Central Excise duty where Notification No. 6/2003-C.E. applied to such intermediate goods from 1 March 2003. The exemption covered goods used within the factory in the manufacture of drugs, and that position was not disputed by the Revenue. On that basis, the Tribunal held that the question of marketability did not need to be examined for determining duty liability, and the Revenue's appeals failed.

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Issues: Whether the intermediate product used captively in the manufacture of the exempt final product was liable to Central Excise duty, or stood exempt under Notification No. 6/2003-C.E.

Analysis: The intermediate goods were admittedly consumed within the factory during the relevant period. The exemption notification covered intermediate products used within the factory for manufacture of drugs with effect from 1-3-2003, and this position was not disputed by the Revenue. In view of the applicable exemption, the question of marketability did not require examination for deciding the duty liability in these appeals.

Conclusion: The intermediate product was not liable to Central Excise duty and the Revenue's appeals failed.

Ratio Decidendi: Where an intermediate product is captively consumed and is covered by an applicable exemption notification, duty cannot be demanded notwithstanding the Revenue's contention on marketability.

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