Captive consumption exemption and Rule 57CC reversal cannot be denied or duplicated when substantive conditions are met.

Exemption under Notification No. 10/96-C.E. was held available for D-21 captively consumed in manufacturing branded and generic injections, and the benefit could not be denied merely because it was not claimed in the classification list, so long as the substantive conditions were satisfied. In relation to Rule 57CC, the Tribunal stated that where common inputs were used for exempt final products and reversal had already been made on the generic injections, a further demand at the D-21 stage amounted to impermissible double recovery. Penalty and interest based on that duplicated demand could not survive, and the impugned demand was set aside.

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Issues: (i) Whether the benefit of Notification No. 10/96-C.E. was available to D-21 captively consumed in the manufacture of the branded and generic injections, and whether denial of the exemption merely because it was not claimed in the classification list was sustainable. (ii) Whether duty recovery under Rule 57CC could be made at both the D-21 stage and the generic injection stage when reversal had already been made on the clearances of the final exempted goods.

Issue (i): Whether the benefit of Notification No. 10/96-C.E. was available to D-21 captively consumed in the manufacture of the branded and generic injections, and whether denial of the exemption merely because it was not claimed in the classification list was sustainable.

Analysis: The exemption for D-21 used within the factory was accepted on merits. The mere omission to claim the notification in the classification list did not justify denial of a benefit that was otherwise admissible. However, the use of the intermediate product had to be viewed with reference to the end use for which it was captively consumed.

Conclusion: The exemption could not be denied on the ground that it was not claimed in the classification list, and the product remained eligible for the notification where its substantive conditions were satisfied.

Issue (ii): Whether duty recovery under Rule 57CC could be made at both the D-21 stage and the generic injection stage when reversal had already been made on the clearances of the final exempted goods.

Analysis: Where common inputs were used and no separate accounts were maintained, Rule 57CC applied to goods used in the manufacture of exempted final products. At the same time, the Tribunal held that recoveries could not be duplicated at two stages for the same transaction chain. Since reversal under Rule 57CC had already been made on the value of the generic injections, a further demand computed again at the D-21 stage was not justified. Penalty and interest founded on that additional demand could not survive.

Conclusion: Double recovery under Rule 57CC at both stages was impermissible, and the demand raised at the D-21 stage was unsustainable.

Final Conclusion: The impugned demand and consequential penalties were set aside, and the appeal succeeded on the footing that Rule 57CC could not be invoked twice for the same manufacture chain.

Ratio Decidendi: A revenue demand cannot be duplicated at successive manufacturing stages where the same common-input credit issue is already neutralised by a Rule 57CC reversal on the exempt final goods, and an otherwise admissible exemption cannot be denied merely because it was not claimed in the classification list.

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