Captive consumption exemption denied where final product was exempt and Rule 57CC payment did not make the clearance duty-paid.

Notification No. 67/95-C.E. was held to apply only when the final products are not exempt from excise duty and are not subject to nil rate. Where the final product was exempt under Notification No. 6/2000 as amended, the amount paid under Rule 57CC was treated as a consequence of common-input credit reversal, not as duty on the final product. An exempt clearance did not become a duty-paid clearance merely because 8% of sale value was paid under Rule 57CC. On that reasoning, captive consumption exemption for the intermediate product was unavailable, and the duty demand was upheld.

---

---

Issues: Whether an intermediate product captively consumed is eligible for exemption under Notification No. 67/95-C.E. when the final product is exempted and cleared on payment of 8% under Rule 57CC of the Central Excise Rules, 1944.

Analysis: Notification No. 67/95-C.E. applies only where the final products are not exempted from the whole of excise duty and are not chargeable to nil rate of duty. Here, the final product was admittedly exempted under Notification No. 6/2000 as amended, and the 8% amount paid under Rule 57CC was not treated as duty on the final product. The payment under Rule 57CC arose only because common inputs were used in exempted and dutiable goods and no separate account was maintained. An exempted final product cannot be regarded as a duty-paid product merely because 8% of its sale value was paid under Rule 57CC.

Conclusion: The intermediate product was not entitled to exemption under Notification No. 67/95-C.E.; the duty demand was upheld and the appeal was dismissed.

Ratio Decidendi: Exemption for captive consumption under Notification No. 67/95-C.E. is unavailable where the final product is exempted or chargeable to nil rate of duty, and payment of 8% under Rule 57CC does not convert such exempted clearance into a duty-paid clearance.

---