Captive input exemption applies where exempt intermediate moulds are used further in manufacture of dutiable copper articles.

Notification No. 217/86-C.E. was treated as extending to copper anodes and cathodes used captively in making moulds, where those moulds were themselves captively consumed in the manufacture of articles of copper. The fact that the intermediate moulds were exempted under Notification No. 171/84-C.E. did not break the manufacturing chain or defeat the exemption, because they were not the final product but part of further captive manufacture. The denial of the benefit was therefore held unsustainable, following the Larger Bench principle in Shri Ramakrishna Steel Industries Ltd. and later Tribunal rulings.

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Issues: Whether Copper Anodes and Cathodes used captively in the manufacture of moulds, which were themselves captively consumed in the manufacture of articles of copper, were entitled to the benefit of Notification No. 217/86-C.E., notwithstanding that the moulds were exempted under Notification No. 171/84-C.E.

Analysis: The exemption under Notification No. 217/86-C.E. was held to extend to inputs used captively for further manufacture where the intermediate moulds, though exempted when cleared as such, were not the end of the manufacturing chain and were themselves used captively in making dutiable final products. The issue was treated as covered by the Larger Bench decision in Shri Ramakrishna Steel Industries Ltd. and by subsequent Tribunal rulings applying the same principle.

Conclusion: The denial of the benefit of Notification No. 217/86-C.E. was unsustainable; the assessee was entitled to the exemption for Copper Anodes and Cathodes used captively in the manufacture of moulds further used captively in the manufacture of articles of copper.

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