Captive-consumption exemption for clinker applies where cement is cleared to SEZ under prescribed export-linked procedure.

Clinker captively used in manufacturing cement cleared to SEZ units or developers without payment of duty was held to retain exemption under Notification No. 67/1995-CE, because such SEZ clearances made under Rule 30 of the SEZ Rules, 2005 read with Rule 19 of the Central Excise Rules, 2002, including bond and ARE-1 compliance, are treated as export-linked supplies rather than exempted clearances. As the final cement clearances to SEZ were not regarded as exempted clearances, the Revenue's basis for denying the captive-consumption exemption failed. The note also records that an earlier Tribunal decision on identical facts had reached the same conclusion.

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Issues: Whether clinker captively consumed in the manufacture of cement cleared to SEZ units or developers without payment of duty continued to qualify for exemption under Notification No. 67/1995-CE.

Analysis: The clinker was captively used in manufacturing cement, and the clearance of cement to SEZ was undertaken in accordance with the prescribed procedure under Rule 30 of the SEZ Rules, 2005 read with Rule 19 of the Central Excise Rules, 2002, including bond and ARE-1 compliance. Clearances to SEZ were treated as export-linked supplies and not as exempted clearances. Since the final product cleared to SEZ was not to be regarded as an exempted clearance, the condition relied on by Revenue to deny the captive consumption exemption did not apply. The prior Tribunal decision on identical facts had already held that supplies to SEZ do not bar the exemption available to clinker used captively in such manufacture.

Conclusion: The appellants were entitled to exemption under Notification No. 67/1995-CE for clinker captively consumed in the manufacture of cement cleared to SEZ units or developers without payment of duty.

Ratio Decidendi: Clearance of goods to SEZ in accordance with the statutory procedure is not an exempted clearance for denying captive-consumption exemption on inputs used in manufacture of such goods.

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