Captive consumption exemption for intermediate goods upheld where exempt final products are manufactured under the notification scheme.

Captively consumed intermediate goods used in manufacturing exempt final products may qualify for exemption under Notification No. 67/95-CE, even if the intermediates are not separately exempt under the notification applicable to the final goods. The Tribunal applied its earlier factually similar decision and the Supreme Court's interpretation of the exemption scheme and Rule 6 of the Cenvat Credit Rules, 2001 to hold that exemption cannot be denied merely on that basis. On that reasoning, duty demand and consequential penalties were held unsustainable, and the appeal succeeded with the impugned order set aside.

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

Analysis: The dispute turned on the availability of exemption to HDPE/PP tapes or strips emerging as intermediate products during manufacture of exempt final goods. The Tribunal followed its earlier decision in a factually similar matter and the principle drawn from the Supreme Court's interpretation of the exemption notification and the obligation under Rule 6 of the Cenvat Credit Rules, 2001. It held that where intermediate goods are captively consumed in the manufacture of exempt final products, the benefit of the exemption cannot be denied merely because the intermediate goods themselves are not independently exempt under the notification applicable to the final product.

Conclusion: The intermediate products were held eligible for exemption under Notification No. 67/95-CE as amended, and the duty demand and consequential penalties could not be sustained.

Final Conclusion: The appeal succeeded and the impugned order was set aside, with consequential reliefs as permitted by law.

Ratio Decidendi: Exemption on intermediate captively consumed goods is available where the governing notification, read in light of the applicable Cenvat credit obligations, permits such benefit despite the exempt status of the final product.

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