Captive use exemption for compounded rubber and intermediate sheets under chapter 40 notifications clarified.

Compounded rubber used captively in the factory to make rubber sheets and strips for footwear falls within Notification No. 152/87-C.E. when the input is used in the manufacture of goods falling under Chapter 40. The intermediate sheets and strips are separately covered by Notification No. 71/68-C.E. as rubber products in the form of plates, sheets and strips falling under Heading 40.05, subject to the notification conditions. The note also records that the marketability of compounded rubber itself was left open, because the matter could be resolved on the construction of the two exemptions.

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Issues: Whether compounded rubber used captively in the manufacture of rubber sheets and strips, which were in turn used for making footwear, was exempt from excise duty under Notification No. 152/87-C.E. and whether the resultant plates, sheets and strips were also exempt under Notification No. 71/68-C.E.

Analysis: Notification No. 152/87-C.E. exempted compounded rubber falling under Heading 40.05 when used in the factory of production for manufacture of goods falling under Chapter 40. The rubber sheets and strips came into existence as intermediate products in the appellants' factory and were classifiable in Chapter 40, even though they were ultimately used for footwear. Notification No. 71/68-C.E. separately exempted rubber products in the form of plates, sheets and strips falling under Heading 40.05, subject to the stated conditions. The question of marketability of compounded rubber itself was left open, as the appeals could be decided on the construction of the two notifications.

Conclusion: The compounded rubber and the intermediate sheets and strips were held to be exempt from duty, and the assessee succeeded.

Ratio Decidendi: Compounded rubber captively consumed in the factory for producing Chapter 40 goods is exempt under Notification No. 152/87-C.E., and plates, sheets and strips falling under Heading 40.05 are separately exempt under Notification No. 71/68-C.E. when the notification conditions are satisfied.

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