Captive consumption exemption under Notification 67/1995-CE applies when Rule 6 obligations are met without availing Cenvat credit.

Notification No. 67/1995-CE exempts captively consumed inputs used in the manufacture of final products, but the proviso denies exemption where such inputs are used for exempted final products unless the manufacturer of both dutiable and exempted goods satisfies Rule 6 of the Cenvat Credit Rules, 2001. Where no Cenvat credit was taken on inputs, input services, or capital goods used in the relevant manufacture, the Rule 6(1) obligation was treated as discharged. On that basis, the intermediate product 'season' remained eligible for exemption, and the demand for duty, interest, and penalty could not survive.

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Issues: Whether the intermediate product "season" manufactured and captively consumed by the appellant was entitled to exemption under Notification No. 67/1995-CE when the appellant manufactured both dutiable and exempted final products and had not availed Cenvat credit.

Analysis: Notification No. 67/1995-CE exempts inputs manufactured in the factory and used within the factory in or in relation to the manufacture of final products, but the proviso denies the exemption where such inputs are used for exempted final products, except where the manufacturer of dutiable and exempted final products discharges the obligation under Rule 6 of the Cenvat Credit Rules, 2001. The appellant manufactured both dutiable and exempted goods and the intermediate product "season" was used in the manufacturing process. It was found that no Cenvat credit had been availed on the inputs, input services, or capital goods used for the relevant manufacturing activity, which satisfied the obligation contemplated by Rule 6(1). The reasoning followed the settled interpretation that clause (vi) of the proviso is attracted when the manufacturer has complied with Rule 6 and is not dependent on the final product itself being partly dutiable and partly exempt.

Conclusion: The appellant was entitled to the benefit of Notification No. 67/1995-CE and the demand of duty, interest, and penalty could not survive.

Ratio Decidendi: Where a manufacturer of both dutiable and exempted final products does not avail Cenvat credit, the obligation under Rule 6(1) is discharged and the intermediate goods used in the manufacture are eligible for exemption under Notification No. 67/1995-CE.

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