Captive consumption exemption for intermediate goods sustained where final products were cleared under international competitive bidding exemption.

Captive consumption exemption on intermediate goods was available where the final products were cleared under an exemption for supplies under international competitive bidding. Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, read with the proviso to Notification No. 67/95-C.E., protected the assessee's claim for exemption on intermediate goods used in manufacture of the exempt final products. On those facts, denial of exemption was unsustainable, and the demand and penalty could not be maintained.

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Issues: Whether the assessee was entitled to captive consumption exemption on intermediate goods under Notification No. 67/95-C.E. when the final products were cleared under Notification No. 6/2006-C.E., in the light of Rule 6(6)(vii) of the Cenvat Credit Rules, 2004.

Analysis: The intermediate product was used in the manufacture of final products cleared against an exemption available for supplies under international competitive bidding. The exclusion contained in Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, when read with the proviso to Notification No. 67/95-C.E., protected the assessee's claim for exemption on captive consumption of the intermediate goods. The denial of exemption was therefore unsustainable on the facts found by the Tribunal.

Conclusion: The assessee was entitled to the captive consumption exemption and the demand and penalty were not sustainable.

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