Factory-use exemption and revenue neutrality fail where moulds leave for job work and duty remains payable on clearance.

Notification No. 67/95-CE was confined to goods produced and used within the factory of production, so moulds cleared out for job work lost the exemption even if they were later returned and used in the appellant's factory. The availability of CENVAT credit did not remove the duty liability at the time of clearance, because revenue neutrality cannot override the statutory obligation to pay duty. The text therefore states that the exemption was correctly denied, the revenue-neutrality plea failed, and the duty demand and penalty were sustained.

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Issues: (i) Whether the appellant was entitled to the benefit of Notification No. 67/95-CE dated 16.03.1995 in respect of moulds cleared without payment of duty for job work and later used in the manufacture of finished goods; (ii) Whether the plea of revenue neutrality based on availability of CENVAT credit could defeat the duty demand.

Issue (i): Whether the appellant was entitled to the benefit of Notification No. 67/95-CE dated 16.03.1995 in respect of moulds cleared without payment of duty for job work and later used in the manufacture of finished goods.

Analysis: The exemption was confined to goods produced in the factory and used in the manufacture of finished goods within the factory of production. Once the moulds left the factory for job work, the notification ceased to apply. Their later return and use in the appellant's factory did not alter the position, as the goods could not be treated as goods used within the factory throughout the relevant process.

Conclusion: The benefit of the notification was correctly denied.

Issue (ii): Whether the plea of revenue neutrality based on availability of CENVAT credit could defeat the duty demand.

Analysis: The availability of CENVAT credit did not extinguish the statutory obligation to pay duty at the time of clearance. Acceptance of the revenue neutrality argument would undermine the scheme of duty payment and credit by allowing non-payment merely on the basis of a subsequent credit claim.

Conclusion: The plea of revenue neutrality was rightly rejected.

Final Conclusion: The concurrent findings upholding the duty demand and penalty were sustained, and no interference was called for.

Ratio Decidendi: An exemption notification limited to goods used within the factory of production does not apply once goods are cleared out for job work, and a prospective entitlement to CENVAT credit does not negate the liability to pay duty at the time of clearance.

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