Classification under Chapter Heading 59.06 preserves captive consumption exemption for rubberized tyre cord warp sheet.

Rubberized tyre cord warp sheet of high tenacity yarn is classifiable under Chapter Heading 59.06, not 59.02, following the Larger Bench and Supreme Court authorities. On that classification, the goods do not attract additional excise duty, and captive consumption in tyre manufacture does not justify denial of Notification No. 67/95-C.E. The classification under 59.02 was not sustained, and the exemption benefit remained available because the conditions for denial were not made out.

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Issues: (i) Whether rubberized tyre cord warp sheet of high tenacity yarn was classifiable under Chapter Heading 59.02 or Chapter Heading 59.06 of the First Schedule to the Central Excise Tariff Act, 1985; (ii) Whether the benefit of Notification No. 67/95-C.E. could be denied on the ground that the goods were captively consumed in the manufacture of tyres.

Issue (i): Whether rubberized tyre cord warp sheet of high tenacity yarn was classifiable under Chapter Heading 59.02 or Chapter Heading 59.06 of the First Schedule to the Central Excise Tariff Act, 1985.

Analysis: In view of the Larger Bench decision and the decision of the Apex Court relied upon, the goods were held to fall under Chapter Heading 59.06. The classification adopted in the impugned order under Chapter Heading 59.02 was therefore not sustained.

Conclusion: The goods were classifiable under Chapter Heading 59.06, not Chapter Heading 59.02.

Issue (ii): Whether the benefit of Notification No. 67/95-C.E. could be denied on the ground that the goods were captively consumed in the manufacture of tyres.

Analysis: Goods classifiable under Heading 59.06 did not attract additional excise duty, and their use in the manufacture of tyres leviable to basic excise duty did not justify denial of the captive consumption exemption. The conditions for denial of the notification benefit were not made out.

Conclusion: The benefit of Notification No. 67/95-C.E. could not be denied.

Final Conclusion: The assessee succeeded on classification and retained the exemption benefit, while the Revenue's challenge to the captive consumption exemption failed.

Ratio Decidendi: Where goods are correctly classifiable under Chapter Heading 59.06 and are used captively in the manufacture of dutiable final products, denial of captive consumption exemption under Notification No. 67/95-C.E. is not warranted.

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