Captive consumption exclusion under excise exemption failed where inputs and finished goods fell under different tariff items.

Captively consumed goods were not excluded from aggregate clearances under Notification No. 80/80-C.E. because Explanation V applied only where the inputs and finished goods fell under the same tariff item. The goods used in manufacture were treated as electric motors, while the finished products were power-driven pumps under a different tariff item, so the exclusion could not be claimed. The challenge to that factual classification was not entertained, and the goods were treated as capable of clearance once manufacture was complete. The pleas of estoppel against the excise authorities and non-recovery from constituents were rejected, and the exemption was unavailable on the facts found.

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Issues: Whether goods captively consumed in the manufacture of another product could be excluded from the aggregate value of clearances under the exemption notification, and whether the appellant had crossed the monetary limit so as to lose the small-scale exemption.

Analysis: The exemption under Notification No. 80/80-C.E. operated subject to the conditions stated in paragraph 2, and Explanation V excluded only those inputs which and the finished goods fell under the same tariff item. The captively consumed goods were treated as electric motors, while the finished goods were power-driven pumps under a different tariff item, so the exclusion in Explanation V was held inapplicable. The challenge to that factual finding was not entertained, and the Court also held that once manufacture was complete the goods were capable of clearance from the factory. The plea of estoppel against the excise authorities and the plea based on non-recovery from constituents were rejected.

Conclusion: The appellant was not entitled to exclude the captively consumed goods from the clearances and had exceeded the prescribed limit; the demand was sustained against the appellant.

Final Conclusion: The exemption was unavailable on the facts found, and the excise demand was upheld.

Ratio Decidendi: Under an exemption notification, captively consumed inputs are excluded from aggregate clearances only when the notification so provides, and where the inputs and finished goods do not fall under the same tariff item, the exclusion cannot be claimed.

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