Captive use exemption under Notification No. 67/95-CE applies where goods are used in relation to manufacture, not only directly in process.

Cement captively used within the factory qualified for exemption under Notification No. 67/95-CE because the phrase "in or in relation to the manufacture" was construed broadly to include use having a sufficient nexus with production. The denial of exemption on the ground that the cement was not directly consumed in the manufacturing process was based on an unduly narrow reading of the notification. The demand and adverse order were therefore set aside, and the assessee was held entitled to the exemption.

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Issues: Whether captive use of cement within the factory qualified for exemption under Notification No. 67/95-CE when the goods were used in relation to the manufacture of final products.

Analysis: The exemption notification covered goods manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products. The expression "in relation to" was treated as broad enough to extend the benefit beyond direct use in the manufacturing process. The denial of exemption by the lower authorities proceeded on an unduly narrow view of actual use in manufacture and did not adequately address the wider statutory language. On the facts, the cement used within the factory had the requisite nexus with manufacture.

Conclusion: The denial of exemption was unsustainable and the assessee was entitled to the benefit of Notification No. 67/95-CE.

Final Conclusion: The demand and the adverse order were set aside, and the appeal succeeded with consequential relief as per law.

Ratio Decidendi: Where an exemption notification extends to goods used within the factory "in or in relation to" the manufacture of final products, the benefit cannot be denied merely because the goods are not directly consumed in the manufacturing process.

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