2017 (1) TMI 285 - AT - Central Excise

Benefit of exemption N/N. 67/1995-CE dated 16/03/1995 - captive consumption of manufactured stampers in the manufacture of CDs - denial on the ground that since the CDs are exempt from payment of duty, exemption on the intermediate product captively consumed is not admissible - is denial justified? - Held that - the stampers manufactured and used captively is falling under Chapter 85. As per the use of the stampers, we observe that the stampers are not getting consumed in the CDs though it is used for manufacture of CDs. Therefore, in our view the stampers falling under Chapter 85 qualifies as capital goods. The capital goods are exempted under N/N. 67/95-CE dated 16/03/1995 even if it is used in the manufacture of exempted final products - the stampers used for manufacture of CDs are capital goods falling under Chapter 85 - benefit of exemption under N/N. 67/95-CE dated 16/03/1995 available - appeal allowed - decided in favor of appellant.

Summary

Issues:
Exemption eligibility for stampers used in the manufacture of CDs under Notification No. 67/1995-CE.

Analysis:
The case involved a dispute regarding the eligibility of exemption under Notification No. 67/1995-CE for stampers used in the manufacture of CDs, which are exempt from Central Excise duty. The Revenue argued that since the CDs were exempt, the exemption for the intermediate product (stampers) used captively was not admissible. The appellant contended that stampers, classified under Chapter 8524 9930, should be considered as capital goods and thus eligible for the exemption. The Tribunal analyzed the use of stampers and observed that although they were used for manufacturing CDs, they were not consumed in the final product. Therefore, the stampers qualified as capital goods and were exempted under the notification, citing precedents like Raymond Ltd and Hero Cycles Ltd.

The Revenue contended that the stampers were inputs as they were captively consumed in the manufacture of CDs, falling under the definition of inputs. They relied on various judgments to support their argument. However, the Tribunal disagreed, noting that the stampers, falling under Chapter 85, were not getting consumed in the CDs but were used in the manufacturing process. Therefore, the stampers were considered capital goods and exempted under Notification No. 67/95-CE, even when used in the production of exempted final products.

The Tribunal referenced the decision in Raymond Ltd, where it was established that captively consumed capital goods were eligible for exemption even when used in the manufacture of fully exempt final products. Similarly, in the case of Hero Cycles Ltd, it was clarified that the disqualification for duty exemption applied only to inputs, not capital goods. The Tribunal concluded that the stampers used for manufacturing CDs were indeed capital goods under Chapter 85 and thus eligible for the exemption under Notification 67/95-CE dated 16/03/1995.

Ultimately, the impugned order denying the exemption was set aside, and the appeal was allowed in favor of the appellant. The Tribunal's decision was based on the classification of stampers as capital goods, exempting them under the relevant notification, despite being used in the manufacture of exempted final products.

(Judges: Shri Ramesh Nair, Member (Judicial) and Shri C J Mathew, Member (Technical))