Captive consumption exemption upheld for tooling retained in factory; duty demand failed despite third-party ownership and cost recovery.

Duty on tooling retained and used within the assessee's factory was held not to be demandable where exemption for captive consumption applied. The Tribunal relied on earlier precedent that exemption cannot be denied merely because the tooling belonged to the buyer or because the cost was recovered through invoices, so long as the goods were manufactured in the factory and used within that factory of production. On that basis, the condition for exemption was treated as satisfied, the duty demand was found unsustainable, and the impugned order was set aside.

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Issues: Whether duty could be demanded on tooling manufactured by the assessee for the buyer's requirement but retained and used within the factory, where exemption under the relevant notification was claimed.

Analysis: The tooling was not cleared out of the factory and remained in the assessee's unit. The earlier Tribunal decision relied upon held that exemption for captive consumption cannot be denied merely because the goods are owned by another or because invoices were raised for recovery of cost, so long as the goods manufactured in the factory are used within the factory of production. On that basis, the condition for exemption was treated as satisfied.

Conclusion: The demand of duty on the tooling was not sustainable, and the appeal was allowed.

Final Conclusion: The impugned order was set aside, and the assessee obtained relief against the duty demand on the tooling.

Ratio Decidendi: Goods manufactured and retained for use within the factory qualify for exemption on captive consumption, and duty cannot be demanded merely because ownership lies elsewhere or the cost is recovered separately.

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