2001 (11) TMI 971 - AT - Central Excise

Summary

Issues:
Exemption under Notification No. 1/93-C.E. for small scale manufacturers based on turnover calculation. Inclusion of value of goods supplied free of cost in the turnover for exemption limit calculation. Liability for Central Excise duty exceeding the exemption limit. Imposition of penalty under Rule 173Q(1).

Analysis:
The appellants, engaged in manufacturing Drilling Tools (TRR Bits), had a turnover of Rs. 29,92,905/- in 1996-97, falling below the exemption limit of Rs. 30 lac for small scale manufacturers as per Notification No. 1/93-C.E. They supplied TRR Bits free of cost to certain companies as per contractual obligations, but the Central Excise authorities contended that the value of these free supplies should be included in the turnover for calculating exemption limit. A show cause notice was issued, alleging duty liability exceeding Rs. 30 lacs and imposing a penalty under Rule 173Q(1).

The Assistant Commissioner of Central Excise confirmed a duty of Rs. 3836/- and imposed a penalty of Rs. 500/- on the appellants. The Commissioner (Appeals) upheld this decision, leading to the appeal before the Tribunal. The appellants argued that the free supplies should not be included in turnover as they did not charge for those goods, maintaining that their total turnover remained below Rs. 30 lacs, thus exempt from Central Excise duty under Notification No. 1/93-C.E.

After hearing both parties, the Tribunal observed that the value of free supplies should not be added to the turnover calculation for exemption purposes. As the free supplied goods were the same TRR Bits contracted to be supplied, and no amount was charged for them, the entire amount collected from buyers represented the total goods supplied, including those provided free of cost. Consequently, the Tribunal allowed the appeal, setting aside the lower authority's order and providing consequential relief to the appellants, if any.