Captive consumption exemption for intermediate goods upheld where notification conditions were met and proviso did not exclude relief

Intermediate goods captively consumed in the manufacture of exempt final products were held eligible for exemption under Notification No. 67/95-C.E., as amended, where the notification's conditions were satisfied and its proviso did not exclude the benefit. The Tribunal followed the earlier legal position that exemption cannot be denied merely because the final product is exempt, when the governing notification and facts are materially similar. The contrary view was found not to reflect the proviso's legal effect, so the duty demand was unsustainable and the impugned order was set aside.

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Issues: Whether the intermediate products captively consumed in the manufacture of exempted final products were entitled to exemption under Notification No. 67/95-C.E. as amended.

Analysis: The dispute concerned duty on intermediate goods used in the manufacture of final products cleared under exemption. The Tribunal followed the earlier decision applying the legal position that the exemption for intermediate goods cannot be denied merely because the final product enjoys exemption, where the governing notification and factual situation are materially similar. The reasoning treated the situation as covered by the exemption notification and found that the contrary view did not correctly account for the proviso and its legal effect.

Conclusion: The intermediate products were eligible for exemption under Notification No. 67/95-C.E. as amended and the duty demand could not be sustained.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief according to law.

Ratio Decidendi: Where intermediate goods are captively consumed in the manufacture of exempt final products, exemption under the relevant notification is available if the legal conditions of the notification are satisfied and the proviso does not exclude such benefit.

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