Captive machinery exemption denied where items were not shown to be maintenance parts for existing installed machinery.

Exemption under Notification No. 281/86-C.E. was available only for goods manufactured in a workshop within the factory for repairing or maintaining already installed machinery. The assessee failed to show that the captively used machinery items were merely replacement parts for such maintenance, and their nomenclature indicated direct use in production. The department's evidence that the items were manufactured to meet increased requirements was not rebutted. A bare assertion that the goods were non-marketable, or that there was no mens rea, did not establish eligibility for the notification benefit. The exemption was therefore denied and the demand sustained.

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Issues: Whether the captively used machinery items were eligible for exemption under Notification No. 281/86-C.E. dated 24-4-1986 as goods manufactured in a workshop within the factory for repairing or maintaining already installed machinery.

Analysis: The exemption applied only to goods manufactured in a workshop within the factory and intended for repairing or maintaining existing machinery. The assessee did not substantiate that the impugned items were merely replacement parts for fitment in the existing machinery. Their very nomenclature indicated that they were directly capable of being used in production, and the statement relied upon by the department that they were manufactured to meet increased requirement was not rebutted. Mere assertion of non-marketable character or absence of mens rea did not establish entitlement to the notification benefit.

Conclusion: The exemption was rightly denied and the demand was sustained against the assessee.

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