Captive consumption exemption remains available for clinker used in cement cleared to SEZ units without duty.

Clinker captively consumed in the manufacture of cement cleared to SEZ units without payment of duty was treated as eligible for exemption under Notification No. 67/1995-CE. The statutory procedure, including bond execution and clearance through the ARE-1 route, meant the goods were not regarded as fully exempted goods. The exemption was held to continue even after the SEZ regime replaced the earlier free trade zone framework, so captive use of clinker for cement cleared to SEZ units/developers remained covered and the duty demand was unsustainable.

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Issues: Whether clinker captively consumed in the manufacture of cement cleared to Special Economic Zone units without payment of duty was eligible for exemption under Notification No. 67/1995-CE.

Analysis: The Tribunal applied the earlier decision in the assessee's own case and held that clearances to SEZ units were made without payment of duty by following the prescribed statutory procedure, including bond execution and the ARE-1 route. Such clearances were not treated as fully exempted goods. The Tribunal further held that, after the SEZ regime replaced the earlier free trade zone framework, the exemption notification continued to cover clinker used captively in the manufacture of cement cleared to SEZ units/developers without duty.

Conclusion: The assessee was eligible for exemption under Notification No. 67/1995-CE on clinker captively consumed for cement cleared to SEZ units without payment of duty.

Final Conclusion: The duty demand was unsustainable and the assessee obtained relief against the impugned order.

Ratio Decidendi: Where intermediate goods are captively consumed for manufacture of final goods cleared to SEZ units without payment of duty in accordance with the prescribed procedure, the exemption for captive consumption under Notification No. 67/1995-CE remains available.

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