Captive-consumption exemption survives export-linked clearance; CT-2 supplies do not make final goods duty-exempt in law.

Intermediate goods captively consumed in manufacturing TV glass shells cleared to an exporter against a CT-2 certificate were not denied captive-consumption exemption under Notification No. 67/95-C.E. merely because the final products moved under the export procedure. The proviso excluding inputs used in exempt or nil-rate final products did not apply, as export-related clearance under the procedure did not by itself make the final goods exempt from duty or chargeable to nil rate of duty in law. The captive-consumption exemption remained available, and the related duty demand and penalty were unsustainable.

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Issues: Whether intermediate goods captively consumed in the manufacture of final products cleared to an exporter against CT-2 certificate under Notification No. 47/94-C.E. could be denied exemption under Notification No. 67/95-C.E. on the footing that the final products were exempt from duty or chargeable to nil rate of duty.

Analysis: Notification No. 67/95-C.E. exempts captively consumed inputs, but its proviso excludes inputs used in the manufacture of final products which are exempt from the whole of duty of excise or chargeable to nil rate of duty. The final TV glass shells were not shown to be exempt under the Central Excise Act or any exemption notification merely because they were cleared to an exporter against CT-2 certificate under the export-oriented procedure of Rule 13. The clearances were made for export-related use and not as an exemption granting the final goods nil duty in law. The Tribunal followed the settled view that supplies made under the export procedure do not by themselves amount to goods being exempt from duty or chargeable to nil rate of duty for purposes of the proviso to Notification No. 67/95-C.E.

Conclusion: The proviso to Notification No. 67/95-C.E. was not attracted, and the denial of exemption, duty demand, and penalty were unsustainable.

Final Conclusion: The assessee was entitled to the benefit of the captive-consumption exemption, and the duty demand and penalty could not be sustained.

Ratio Decidendi: Clearance of goods under the export procedure against CT-2 certificate does not, by itself, make the final products exempt from duty or chargeable to nil rate of duty so as to deny captive-consumption exemption to the intermediate goods.

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