Captive-use exemption for intermediate goods survives where Rule 6(6)(vii) conditions are met under the CENVAT credit framework.

Intermediate goods cleared for captive use in supplies to mega power projects remain eligible for exemption under Notification No. 67/95-CE where the conditions of Rule 6(6)(vii) of the CENVAT Credit Rules, 2004 are satisfied. The note explains that the proviso to the notification must be read with the Rule 6(6)(vii) exception, and compliance with the credit rules does not by itself defeat the exemption for such captive clearances. On that basis, the duty demand, interest and penalty were held unsustainable.

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Issues: Whether the appellant was entitled to exemption from duty on intermediate products cleared for captive use in supplies to mega power projects under Notification No. 67/95-CE, in the light of the exemption framework and Rule 6(6)(vii) of the CENVAT Credit Rules, 2004.

Analysis: The dispute turned on the interaction between the proviso to Notification No. 67/95-CE and the exception carved out for cases covered by Rule 6(6)(vii) of the CENVAT Credit Rules, 2004. The appellant had cleared the goods for use in mega power projects and had discharged the obligations attributable under the credit rules. The Tribunal followed earlier decisions holding that the exception in Rule 6(6)(vii), read with the proviso to Notification No. 67/95-CE, preserves exemption for intermediate goods even where the final products are exempted, and that denial of the benefit on the ground of Rule 6 compliance was unsustainable in such cases.

Conclusion: The appellant was entitled to the exemption and the duty demand, interest and penalty could not survive.

Ratio Decidendi: Where the conditions of the exception under Rule 6(6)(vii) of the CENVAT Credit Rules, 2004 are satisfied, the proviso to Notification No. 67/95-CE does not deny exemption on intermediate goods used for captive consumption in the relevant exempted clearances.

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