Duty-paid inputs used in captive capital goods were not treated as inputs for dutiable final products

Duty-paid inputs used to manufacture captively consumed capital goods exempt under Notification No. 67/95-CX. were not treated as inputs used in the assessee's dutiable final products. The capital goods were a distinct intermediate product, not the finished goods cleared from the factory, and their later use in manufacturing dutiable products did not convert the original inputs into inputs used directly for those final products. Once the inputs were transformed into capital goods, they could no longer be regarded as remaining in the same form for the cleared final products. The claim for such treatment was rejected.

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Issues: Whether duty-paid inputs used in the manufacture of captively consumed capital goods, which were exempt under Notification No. 67/95-CX. dated 16-3-1995, could be treated as inputs used in the manufacture of the assessee's dutiable final products.

Analysis: The capital goods manufactured from the inputs were themselves a distinct intermediate product and were not the finished goods cleared from the factory. The fact that such capital goods were later used in the manufacture of dutiable final products did not mean that the original inputs had been used directly in the manufacture of those final products. Once transformed into capital goods, the inputs could no longer be regarded as remaining in the same form or as being used as such in the cleared final products.

Conclusion: The claim for treating the inputs as having been used in the manufacture of dutiable final products was rejected, and the appeal failed.

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