Captive consumption exemption applies to intermediate goods when final products are only cleared under SSI exemption.

Captively consumed intermediate goods used within the factory for manufacture of final products were eligible for exemption under Notification No. 67/95-CE. The bar in the notification did not apply merely because the final products were cleared under the value-based SSI exemption of Notification No. 8/2003-CE, since the final products remained otherwise dutiable in the relevant legal sense. On that footing, denial of exemption to the intermediate goods was unsustainable, and the exemption under Notification No. 67/95-CE was available.

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Issues: Whether intermediate goods used captively in the manufacture of final products were eligible for exemption under Notification No. 67/95-CE when the final products were cleared under the SSI exemption Notification No. 8/2003-CE.

Analysis: The exemption under Notification No. 67/95-CE was held applicable because the intermediate goods were manufactured and consumed within the factory for production of the final goods. The bar under the notification was found inapplicable since the final products were not exempt from duty in the sense contemplated by the notification merely because the clearances were covered by a value-based SSI exemption. The final products remained otherwise dutiable, and the captive intermediate goods therefore did not lose the benefit of exemption. The earlier Tribunal view, followed by reference to the Supreme Court ratio, supported this position.

Conclusion: The intermediate goods were entitled to exemption under Notification No. 67/95-CE, and the denial of exemption was unsustainable.

Ratio Decidendi: Captively consumed intermediate goods are eligible for exemption under Notification No. 67/95-CE where the final products remain otherwise dutiable and are cleared only under a value-based SSI exemption.

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