Captive consumption exemption for intermediate PP strips upheld where final woven sacks were not fully duty-exempt

Captive intermediate PP strips manufactured in the assessee's own factory and used in making woven sacks were eligible for exemption under Notification No. 67/95-CE because they were not hit by the notification's exclusion clauses, and the final product was not a barred category under the Table. The proviso also did not apply, since the woven sacks were not exempt or nil-rated merely due to SSI status; duty remained payable on clearances beyond the prescribed ceiling. The intermediate goods therefore qualified for the captive consumption exemption.

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Issues: Whether intermediate PP strips manufactured in the appellant's own factory and used captively in the manufacture of woven sacks were entitled to exemption under Notification No. 67/95-CE dated 16.03.1995.

Analysis: The intermediate PP strips were manufactured within the factory and used in the manufacture of the final product. They were not covered by the exclusionary clauses in column 2 of the Table to the notification, and the final product was also not one of the barred categories in column 3. The proviso to the notification did not apply because the final goods were not exempt from duty or chargeable to nil rate merely by reason of SSI status, as duty was payable on clearances beyond the prescribed ceiling.

Conclusion: The intermediate goods qualified for exemption under Notification No. 67/95-CE, and the appeal was allowed.

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