Captive use exemption for tank lining materials upheld where replacement was integral to the manufacturing chain

Captively used lead sheets and wires for lining and relining storage tanks were treated as goods used in or in relation to manufacture because the tanks formed part of the production chain and the lining had to be periodically replaced due to corrosion. On that basis, the exemption under Notification No. 67/95-C.E. was held applicable to the captive consumption of those materials.

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Issues: Whether lead sheets and wires captively used for lining and relining of storage tanks were eligible for exemption under Notification No. 67/95-C.E. as goods used in or in relation to manufacture of the final product.

Analysis: The tanks were used for storing zinc sulphate solution and the lining required periodic replacement because of corrosion caused by chemical reaction. The use of lead sheets and wires for replacement of the tank lining was treated as part of the manufacturing chain, since manufacture was regarded as complete only when the product was finally stored. The exemption was therefore held applicable to the captively consumed goods.

Conclusion: The captively used lead sheets and wires were held to be used in or in relation to the manufacture of the final product and were eligible for exemption under Notification No. 67/95-C.E.

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